APEC delegates warned against dangers of taxing tourism

BORACAY, Philippines – An official of the Asia-Pacific Economic Cooperation (Apec) told delegates of the dangers of taxing tourism and the need for an intelligent, simple taxation system instead.

In his remarks before the Tourism Working Group attended by APEC delegates Tuesday, Lead Shepherd Javier Esteban Guillermo Molina said taxing the tourism sector with levies, visa fees and airport fees, among others “can be counterproductive to the economy and sustainable tourism development.”

Taxing tourism could also result in “reducing visitors’ demand for these services, affecting the sector contribution to the gross domestic product, employment and micro small and medium enterprises´ (MSMEs) growth.”

Molina, who is also chief of the Apec International Affairs and Cooperation Unit, said taxation should not hinder the growth of tourism, which has been as essential sector contributing to economic growth of Apec economies.

READ: Boracay execs urge Apec to tackle taxation to develop, not stunt, tourism
Molina said the American region saw a seven-percent growth in travel and tourism, while the Asia Pacific had a five-percent growth. “The region is growing well above the average. All this producing more business, more jobs, more opportunities and a better life for the people in the Apec,” Molina said.

He acknowledged the role of taxes as a fiscal measure for economic growth, but said an increase in tourism growth should not be a reason to impose taxes.

“Properly constituted taxes are certainly a necessary and legitimate fiscal tool for every economy, as they create a level playing field for private enterprises and the tourism sector should naturally contribute to it,” Molina said.

“(But) tourism activity has been growing at higher rates than the economy in general, it is one of the most dynamic economic sectors; nevertheless, this should not be translated into an increase in taxes,” he added.

He urged fiscal policy makers not only to consider the short term revenue-generation brought by taxes, but also the long-term benefits from an unburdened and booming tourism sector.

“Fiscal policy makers should bear in mind not only the short-term revenue, but the medium- and long-term impacts on its power to create economic growth and development while designing new taxes,” he said.

Molina added that fiscal measures like taxes “should be approached cautiously to ensure it maximizes the growth of domestic and international travel and tourism in the region and do not create hurdles to this activity.”

Instead, what should be promoted is intelligent taxation supported by the United Nations World Tourism Organization (UNWTO).

“Economies should strive to develop what the UNWTO has called intelligent taxation policies (as opposed to uninformed taxation). These policies maintain the efficiency of the fiscal system by adapting it to the changing environment and the volatile requirements. This will be possible by keeping taxes simple, fair and aimed at promoting stimulus and growth,” Molina said.

“(We need) taxes that do not end up killing the goose that lays the golden eggs–taxes that are correct,” he added.

The delegates on Tuesday attended “Conference on Enhancing Tourism Competitiveness in the Apec region through Realignment of Tourism and Taxation policies,” which aims to align tourism and taxation policies so that taxation will stimulate, not stunt, the demand for travel especially among the Apec economies.

“Over the past years, there has been an extraordinary growth in travel and tourism in Apec, resulting in more business opportunities and job creation. Based on the Apec TWG project in 2011-2012… taxation was clearly cited as one of the impediments towards maximizing the full growth potential of tourism to raise more revenues and jobs in the region,” the conference’s rationale said in its paper.

Apec senior officials will meet from May 20 to 21 to provide updates on previous commitments, as well as introduce additional measures to achieve the following Apec priorities – regional economic integration, SME’s participation in regional and global markets, investment in human resource development, and sustainable and resilient communities.

The second senior officials meetings are preceded with 37 technical working group meetings on a variety of topics, such as oceans and fisheries, food security, science and technology, higher education, human resource development, emergency preparedness, internet economy and connectivity, counterterrorism, tourism, among others.

Senior officials will then report to trade ministers during the Ministers Responsible for Trade meetings on May 23 to 24 also here in Boracay.

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The Philippines is hosting this year’s Apec, a delegation of 21 member economies. The country hosted Apec ahead of the schedule Association of Southeast Asian Nations integration in 2015. It hosted the APEC leaders meeting for the first time in 1996. IDL