REQUISITOS OBLIGATORIOS, DE CATEGORIZACIÓN Y DISTINTIVOS

Following the classification presented in the Table 1.1, another typology of tourism externality is represented by environmental externalities. These can affect destinations in which a large number of visitors are concentrated both spatially and temporally. Archer et al. (2005) make some examples: “marshlands and mangrove swamps, which provide both outlets for flood control and also the basic ingredients for local fishing industries, have been drained to create tourist marinas. Water resources needed by local farmers and villages have been diverted for the use of tourist hotels and golf courses, and, in some mountainous areas, forests have been depleted to create ski slopes with much resultant soil erosion, flooding, and mud slips causing substantial loss of life and damage to property” (p. 92).

In comparison with two previous typologies of externalities, environmental ones represent a more common case study. Indeed, for its importance OECD (1997) provides a suitable definition: “Environmental externalities refer to the economic concept of uncompensated environmental effects of production and consumption that affect consumer utility and enterprise cost outside the market mechanism. As a consequence of negative externalities, private costs of production tend to be lower than its “social” cost. It is the aim of the “polluter/user-pays” principle to prompt households and enterprises to internalize externalities in their plans and budgets.”

Taxes are included by Stabler et al. (2010) in the list of policy/environmental instruments suitable as a solution of market failure (see Figure 2.1), and it is well known in economic literature that externalities can be internalized by using taxes or subsidies (Schubert, 2009). Public institutions levy taxes for three main reasons: 1) allocate a budget to supply goods and services; 2) redistribute wealth amongst residents; 3) internalize negative externalities (see also Gago et al., 2009)21. In presence of market failure, governments may issue taxes to internalize the negative impact exerted by free riders on, amongst others, common resources. This is particularly true for the tourism activity where consumers tend to purchase and make use of environmental resources at the visited destination, without directly contributing to public budget. Since, environment and public services are

21 _{According to Gago et al. (2009) “The broad use of tourist taxation can be put down to several}

reasons:(i) the magnitude of revenue potential (…);(ii) the low distortionary effects of taxation and the exportability of the fiscal burden (…); (iii) the ability to act as a price substitute for the public goods and services consumed by tourists; (iv) the corrective role that could be played by these taxes (…) (p. 381).

two fundamental components of the tourism product, an uncontaminated landscape along with efficient public services is essential to foster both tourism- based economic growth and residents’ quality of life - in the short and long run. However, during the tourism season, tourism destinations often struggle to maintain unaltered tourists’ experience quality as well as residents’ quality of life. Furthermore, many local governments face budget constraints that limit ways to mitigate negative externalities on the environment.

In this context, a government can achieve an internalization of negative externalities either via a subsidy to pursue certain public interest objectives (see e.g. United Nations, 2000; Dixon et al., 2001) or issuing taxes. Specifically, taxes correcting any environmental externality caused by the presence of tourism are called eco-taxes22. Hence, tourism eco-taxes can be defined as those raised on tourists for improving and protecting the environment. In recent times, the debate to introduce, or reintroduce, tourism taxation in specific destinations has become a relevant and controversial issue. As reported by the UNWTO (1998), while before the 1960’s international tourism was effectively free of taxation, currently there are approximately forty different types of taxes issued on the tourism sector in both developed and developing countries. In this perspective, the aim of issuing tourism taxes is to raise more revenues so as to fund environmental preservation, improve public infrastructure and the overall quality of services supplied at a destination. Therefore, on the one hand, local governments support tourist taxation as an instrument to increase revenues from the non-resident population, on the other hand, stakeholders argue on the possible loss of competitiveness caused by its application (Aguilò et al., 2005).

As a consequence a strand of research, starting from the late ‘70s, has analyzed the effect of the tourism taxation on tourist flows23. Based on empirical analyzes, many scholars are convicted that tourist demand is not affected by the tourist taxation (Mak and Nishimura (1979) for the case of Hawaii; Combs and Elledge (1979) for the case of US; Gooroochurn (2004) and Gooroochurn and Sinclair (2005) for the case of Mauritius). This means that in the destinations analysed tourism demand is inelastic. According to Taylor et al. (2005) several empirical studies have shown that the demand for tourism is inelastic. This is due to the fact that many destinations have specific -and sometimes unique - characteristics, no clearly substitutable because of their location, attractive natural amenities and historical heritage. Crouch et al. (1992) analyzing a sample of forty-four works, calculate the average elasticity equal to -0.39 (a 1% increase in the relative prices would lead to a 0.4% decrease in arrivals); Vanegas and Croes (2000) by using data on American tourist in Aruba, record a very similar result: -0.56 in the short

22 _{See footnote 13 in Chapter 1 of the present dissertation for a complete definition of eco-tax.} 23 _{For a more detailed literature review on this topic see Chapter 5 (Section 5.3) of the present}

run (a 1% increase in the relative prices would lead to a 0.6% decrease in arrivals); Hiemstra and Ismail (1992) show an elasticity equal to -0.44 in the American hotel demand (a 1% increase in the relative prices would lead to a 0.4% decrease in arrivals).

As recently reported by Sheng and Tsui (2009) “The past literature includes a number of studies on the impact of tourism taxes on destinations’ welfare, often with controversial findings” (p. 627). Indeed, some studies, among which that by Durbarry and Sinclair (2001), highlight that tourism is sensitive to price. In particular in the United Kingdom, tourism taxation generates a decrease of tourist expenditure (elasticity of the demand equal to 1).

The most part of these works is based on the Computable General Equilibrium model (CGE) (see Gooroochurn, 2004; Gooroochurn and Sinclair, 2005; Gago et al., 2009). The CGE approach is employed in order to simulate the macroeconomic condition of a country or a region, for a specific year. This represents the main weakness of the above literature, because the effect of taxation on tourist flows can occur after some period of time and not only during one year. In addition, the CGE model requires several data on all markets of an economy, such as for example goods, services, factors etc., often included into the National Accounting Matrix. In the case of Italy, this point is not trivial. Recent laws on tourism taxation, actually, offer to the municipalities the possibility to introduce the taxation. Therefore policy evaluation cannot take into consideration national or regional level, but the more detailed level.

Figure 2.1 Simplified scheme on environmental externalities

Source: Author’s elaboration on Sinclair and Stabler (1997)