Tax on tourism in Europe: Does higher value-added tax (VAT) impact tourism demand in Europe?

ABSTRACT

Does higher value-added tax (VAT) impact tourism demand in Europe? The research provides unique World Bank data estimation of the marginal and nominal effects on the number of tourists visiting Europe. The sample of data includes tourists listed by the World Bank from 1995 to 2016, also VAT in Europe from the trade association of hotels, restaurants and cafes HOTREC is applied to capture the effects on the tourism industry. Findings indicate that tax increase in the form of VAT not to influence tourist inflow to Europe. Also, findings do not indicate the ‘close to maturity’ tourism in Europe to be more sensitive to tax than ‘still on the growth path’ countries, contrary to suggestions by some previous European research.

KEYWORDS:

• Tourism
• International trade
• value-added tax (VAT)
• Europe
• Butler Tourist Area Cycle of Evolution (TALC) model

JEL Classification:

• C1
• F10
• F12

Disclosure statement

No potential conflict of interest was reported by the author(s).

Correction Statement

This article has been republished with minor changes. These changes do not impact the academic content of the article.