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Economic effects of tourism tax changes in Australia: empirical evidence from a computable general equilibrium model

Ihalanayake, Ranjith (2012) Economic effects of tourism tax changes in Australia: empirical evidence from a computable general equilibrium model. Tourism Economics, 18 (1). pp. 181-202. ISSN 1354-8166 (print) 2044-0375 (online)

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Abstract

This paper analyses the economic effects of tourism tax changes in Australia. To this end, a tourism tax model (TTM), a computable general equilibrium (CGE) model of the Australian economy, is developed explicitly incorporating two tourism sectors. This is an important improvement in modelling tourism in a CGE context. The tourism sectors are incorporated using the ‘tourism dummy sector approach’, in which both the demand and supply sides of tourism sectors are modelled adequately to reflect the true nature of tourism. This model is used to carry out simulations of abolishing tourism taxes which are financed by an increase in the GST (goods and services tax). The simulation results suggest that the tourism sector expands as a result of tax abolition, while the other sectors contract. The increase in the GST, on the other hand, leads to an increase in commodity prices and thus the economy suffers, as reflected in a reduction in GDP. Overall, the results show that these tax changes are contractionary, as reflected in real consumption and GDP.

Item Type: Article
Uncontrolled Keywords: ResPubID25777, Australian tourism, CGE, tourism taxation, tourism economics, mathematical models, computer models
Subjects: FOR Classification > 1402 Applied Economics
Faculty/School/Research Centre/Department > College of Business
Depositing User: Yimin Zeng
Date Deposited: 27 Feb 2014 06:14
Last Modified: 27 Feb 2014 06:14
URI: http://vuir.vu.edu.au/id/eprint/23194
DOI: 10.5367/te.2012.0105
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Citations in Scopus: 1 - View on Scopus

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