Investor Presentaiton

FINANCING SUSTAINABLE TOURISM IN KHYBER PAKHTUNKHWA Implementing user fee or levies for specific projects: Tourism service charges and environment conservation and protection can be done effectively through specific programs financed by a user fee or a specific levy. Tourists and local businesses may be willing to pay for services they receive. Some examples are solid waste collection and disposal system where initial investment is made by the relevant develop- ment authority and the operation or service is financed by a user fee. Sewerage system and treatment plant installed by the authority and maintained through a monthly fee could be another service intervention. Such interventions and programs can easily be piloted in locations such as Kaghan, Naran and the Galliyat. If successful, these can be scaled up and extended to other tourist hotspots in KP. Such strong and narrowly defined hypothecation of revenues is observable and transparent and thus likely to succeed then broad earmarking, where revenue goes to the tourism sector (authority) and not a well-defined program or inter- vention. However, this area requires further research work where service delivery gaps are identified in tourist areas through institutionalised public-private dialogue, and then specific interventions designed and tested before a large-scale implementation. Remove tax exemptions: across It is recommended that the federal and provincial tax exemptions in Swat and Chitral be withdrawn post 2023 and the same tax rates (sales tax, income tax etc.) be applied all KP. Also, the proposed ten-year tax exemption to businesses locating in ITZS needs reconsideration. Removal of such tax exemptions will reduce distortions in invest- ment decisions, geographical disparity in business opportunities and raise considerable revenue which could be spent on tourism infrastructure development and related services. Apportion existing provincial taxes/excise duties as tourism cess: Introducing additional taxes or a tourism cess for the specific purpose of tourism development is not recommended keeping in mind increased cost to tourists and businesses. Existing sales tax or excise tax on hotels could be apportioned as tourism cess and the proceeds can be spent on sustainable tourism development in areas where revenue is generated from. Alternatively, a tourism cess on tourism and hospitality businesses and services could be introduced with an equal and con- current reduction in sales tax. The objective here is not to increase the overall tax liability of tourism related businesses in KP but to ring fence a portion of the tax revenue for tourism development. The revenue from this apportioning could supplement the KPCTA tourism fund or add to provincial government transfers to relevant development authorities for spending on tourism related schemes. These revenue receipts can also be used for community development projects around the tourist resorts by allocating these funds into the local government budgetary pool. All these options will however require legislative action and might be difficult to implement given the centralized structure of finance and budgetary processes in the province. 09

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