The Effect of Tourism Taxation on International Arrivals to a Small Tourism-Dependent Economy

This paper examines the effects of tax policies on international tourist arrivals to Maldives using fully modified ordinary least squares (FMOLS) panel data method. The is chosen as a case study because nation heavily dependent tourism and earn up 70% total government revenue in tax. As expected, estimated elasticities show that adversely influences inbound travel, but significant differences across source markets are observed. Specifically, 10% increase reduces demand by 5.4%. degree responsiveness changes taxes essential for policy since change cost visiting destination resulting from affects demand. Consequently, effectiveness current fiscal matter concern attracting tourists Maldives.