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Tourism Tax Is Important for Defending Regional Climate Change Effects

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Tourism is a vital source of revenue for local economies worldwide—but it also is a significant contributor to environmental degradation and social inequity.

This dynamic has spurred a conversation about the role of tourism and travelers and the role of taxation in fostering sustainable practices. Policies such as Hawaii’s proposed $25 per-visitor tourism tax, as well as similar policies in Italy and Bali, aim to mitigate the harmful environmental effects of tourism while keeping the cash flowing for regions that rely on it.

With the global poor set to disproportionately bear the brunt of environmental disasters, a well-conceived tourist tax in one jurisdiction could model a way to protect the environment and provide a social safety net for those most in the crosshairs of climate change globally.

Expanding Scope

Widening the view of climate change’s negative effects isn’t just sound environmental policy—it’s crucial tax policy. Key to this wider view is a recognition of how climate change exacerbates existing environmental issues and socioeconomic disparities.

Climate change pushes more people into poverty and disproportionately affects poor regions and people. Such populations become more susceptible to the adverse impacts of a changing climate, creating a cycle of impoverishment and exposure.

The rationale behind expanding the theory behind tourism taxes is twofold. First, it accurately reflects that environmental and socioeconomic impacts of climate change are intertwined. Unregulated tourism directly affects the livelihoods of local communities and those in poverty. These groups are often the least-equipped to adapt to rapid environmental changes and extreme weather.

Second, with a shift in perspective, socioeconomic considerations can be incorporated into existing tax policy systems to combat inequality and build resilience among vulnerable populations. A program providing a universal basic income for poor residents of a tourism destination, or housing subsidies, should be viewed as pro-climate investments on par with solar panel arrays or wind farms.

Policy Implementation

The transition from theoretical tax policies to practical and impactful action requires meticulous policy planning. This would ensure tourism tax dollars are allocated toward the programs that stand the best chance of offsetting climate harms.

At the outset, the revenue generated from tourism taxes should be allocated transparently and efficiently. Local communities, environmental groups, and the tourism industry generally should have a clear understanding of how funds are being used. Such transparency would go a long way toward ensuring tourism tax revenue isn’t merely being used to attract more attention to the tourism industry.

Such oversight is crucial; increases in tourism spending doesn’t necessarily correlate with a reduction in wealth inequality in a given region. This may be because tourism dollars are cascading through existing economic structures—the same rivulets and eddies are guiding the stream of tourist revenue into the pockets of the already better off.

To counteract this, tax policy can sit at the headwaters, siphoning off a portion of tourism revenue to be redirected toward lifting the most vulnerable populations in each region out of poverty—a primary defense against the most negative effects of climate change.

Adaptive Frameworks

As the impacts of climate change and global tourism evolve, so must any policies designed to address the effects of the latter on the former.

Such an adaptive policy framework must allow for regular review, adjustment, and reallocation of tourism tax revenue. It must build on results from places such as Hawaii and Italy, establishing partnerships between jurisdictions to share information on the evolving needs of local communities and ecosystems.

A clear model for this level of cooperation is the Organization for Economic Cooperation and Development-led global agreement on base erosion and profit shifting—with more than 140 signatory countries, the agreement to mitigate profit shifting and tax revenue loss gained widespread support.

As in the case of profit shifting, addressing climate change at the intersection of tourism can’t be done unilaterally—it requires cross-jurisdictional cooperation and information sharing.

To harness the potential of tourism taxes, a similar global approach is essential. This collaborative model shows how shared goals and mutual benefits can drive widespread consensus across diverse jurisdictions—when input from participants is encouraged and formally integrated into policymaking.

Any such effort must prioritize inclusivity and ensure that voices of all stakeholders, most especially those from developing countries and vulnerable communities, are heard and heeded. Tourism tax revenue should be developed and then deployed based on cooperative, community-focused decisions, rather than dictated by top-down mandates from more developed regions. In other words, ask, “What do you need?” rather than say, “This is what you need.”

The future of the planet and its inhabitants hinges on our ability to act decisively. We have demonstrated this ability when financial interests were on the line, so it’s clearly possible.

By adopting a global, inclusive approach to tourism taxation that values both environmental stewardship and social equity, we can mold tax policy to reflect the twin realities of continued tourism and ongoing climate change.

Andrew Leahey is a tax and technology attorney, principal at Hunter Creek Consulting, and adjunct professor at Drexel Kline School of Law. Follow him on Mastodon at @[email protected]

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