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Edited by Larry Dwyer and Peter Forsyth
Chapter 11: Taxation of Travel and Tourism
James Mak Introduction During the second half of the twentieth century, travel and tourism grew spectacularly, becoming one of the world’s major economic and social forces. According to the World Tourism Organization (WTO), in 2002, 714 million tourists left their own country to visit other countries, compared to only 25 million in 1950.1 Since the 1970s, the number of tourists travelling abroad has grown 1.4 times as fast as the world’s economy.2 While comprehensive statistics on domestic tourism are not available, it is believed that domestic tourism may be ten times as large as international tourism.3 The World Travel & Tourism Council (WTTC), a tourism advocacy group whose membership comprises some of the world’ largest travel businesses, estimates that tourism accounts for more than 10 per cent of the world’s gross domestic product, 8 per cent of worldwide employment, and 12 per cent of global exports.4 The growing importance of tourism has not escaped the attention of policy makers. Travel destinations see tourism development as an attractive economic beneﬁt, generating income, employment, foreign exchange and tax revenues. But tourism development is not a free good. Like residents, tourists and their suppliers demand public services which have to be paid for through taxes and user charges. The production of tourism goods and services requires resources which may have to be diverted from other economic uses. Frank Mitchell notes: If all resources [employed in tourism] are priced at their opportunity cost, at a minimum, the net value of tourism will consist of...
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