A TAX on foreign tourists has the potential to raise additional revenue for the government at a negligible cost to foreign travelers, though such a tax would be difficult to implement, a government think tank said.

Although it is not referring to any proposed legislation, the National Tax Research Center (NTRC) said a tax on spending by foreign visitors poses “administrative difficulties” and may also have a negative impact on the tourism industry.

“Albeit the potential of the proposed foreign tourist tax to raise much-needed revenue for the government to be used for tourism-related projects and programs, its imposition, as of the moment, may need further study given the negative effect it may pose to the tourism industry and the administrative difficulty in identifying those who travel purely for leisure and/or vacation purposes who are the real target of the proposed tax and those who visit the country for medical treatment, official trip/mission or for business,” the NTRC said in the Tax Research Journal.

Tourism taxes in other countries often take the form of an accommodation tax or an airline tax.

A tax on accommodation for foreign tourists similar to that imposed by European countries, may amount to P1,000 to P1,500 per person.

An accommodation tax could generate for the government around P9.4 billion to P14.2 billion over five years.

“The percentage share of said option to total per capita tourist expenditure is very minimal at 2% and 3% for P1,000 and P1,500 respectively; hence, it is deemed affordable to tourists,” the report read.

It said if airline tickets of foreign arrivals were taxed at the same rate as travel tax (P1,620 for economy class tickets), it could raise some P15.3 billion over five years, and the cost to a foreign visitor would be about 3% of travel spending per person.

The government expects the tourism industry to grow at an average of 15.4% in the next five years. By 2022, the Tourism department estimates that foreign visitor arrivals will rise to 12 million from 5.78 million in 2016.

“It is a known fact that a tax imposed on any sector can somehow stifle growth especially if said tax is excessive. The proposal may also be difficult to administer considering that the purpose of tourists traveling to the country may vary,” NTRC said.

Those who travel for business, medical treatment or official missions “are not the target of the proposed tax but those who are traveling to the country for leisure and/or vacation purposes,” it added.

“Considering also that the country lags behind other ASEAN (Association of Southeast Asian Nations) member countries in terms of attracting tourists, a tax imposed thereon would further make the country uncompetitive.”

Among the 10 ASEAN countries, the Philippines ranked sixth in foreign tourist arrivals during the 2011-2016 period.

“It may be worthy to weigh the potential revenue to be raised from the said tax proposal vis-a-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,” the think tank said.

In 2016, the tourism industry was equivalent to 8.6% of the economy, the third-largest share next to Cambodia’s 12.2% and Thailand’s 9.2%. — Elijah Joseph C. Tubayan