NTRC warns vs adverse effects of foreign tourist tax

MANILA, Philippines — Think tank National Tax Research Center (NTRC) said a proposal to impose tax to foreign tourists visiting the country may negatively affect the Philippine tourism industry.

In a research journal posted in its website, the NTRC said plans to impose a “foreign tourist tax” would need further studies due to the negative effects it may cause the tourism industry, despite the potential revenues it may generate for the government.

“The potential of the proposed foreign tourist tax to raise much needed revenue for the government may need further study given the negative effect it may pose to the tourism industry and (its) administrative difficulty,” the NTRC said.

“It may be worthy to weigh the potential revenue to be raised from the said tax proposal vis-à-vis its impact on tourist arrivals and their ability to bring about economic benefits to the country in terms of income, employment, and revenue associated therefrom,” it said.

According to the NTRC, a foreign tourist tax – which may come in the form of entry taxes or accommodation taxes – has gained interest among policymakers and stakeholders as a potential source of revenue to finance tourism infrastructure and tourism-related programs, and compensate for the negative environmental impact of tourism.

The NTRC said the tourist tax, if done in the form of hotel taxes, may be imposed on foreign visitors at a rate of P1,000 to P1,500, which corresponds to about two to three percent of total per capita tourist expenditure, recorded at P49,975 in 2016.

“The proposal would give the government an average annual revenue ranging from P9.4 billion to P14.2 billion,” the think tank said.

In the second option, the proposed foreign tourist tax may be included in airline tickets at P1,620, similar to the travel tax levied to outbound Filipinos.

“For the succeeding five years, around P15.3 billion annually is expected to be raised by the government from this source,” the NTRC said.

However, the research institute said the proposal may also stifle the growth prospects of the local tourism industry.

“The proposed tax may dampen the country’s tourism industry and consequently derail all efforts of the government in promoting the country as a premier tourist destination. The possibility of government not attaining its projected tourist arrivals until 2022 is likewise not farfetched,” the agency said.

In 2016, total arrivals to the Philippines reached 5.97 million, 96.8 percent (5.77 million) of which are foreign tourists. The Department of Tourism (DOT) is planning to double this figure to 12 million by 2022.

In addition, the NTRC said the proposal may be difficult to administer due to the varying nature of travel of foreign visitors – some may be here for medical treatment, official trip, pilgrimage, or business. Only those who are traveling to the country for leisure or vacation purposes are the target of the proposed tax.

“Considering also that the country lags behind other ASEAN member countries in terms of attracting tourists, a tax imposed thereon would further make the country uncompetitive,” the NTRC said.