Investor Presentaiton
FINANCING SUSTAINABLE TOURISM IN KHYBER PAKHTUNKHWA
4.3
Mitigating threat to Environment and Ecology
of the Region from Increased Tourist Activity
With increased number of tourists and an
unregulated rise in commercial activity, the
environment and ecology of natural resorts in
KP and especially in the planned ITZs, are under
a serious threat of irreversible damage and
degradation. Conservation and environment
taxes are used world over and are sometimes
tied to income tax rebates to ensure private
sector
Pigouvian taxes/levies can be used to
regulate the flow of tourists and to mitigate
negative externalities caused by commercial
activities such as de-forestation, pollution,
solid waste disposal etc. The provision of a
public good or a service can be connected
directly to a fee or a charge to create
willingness to pay which might otherwise be
absent with a non-specific environmental
Cess or a tourism tax.
compliance 21. Measuring the magnitude of
negative externalities and determining
appropriate tax rates for businesses to
internalize externalities is however difficult.
Alternative ways of reducing such externalities
effectively can be through localized inter-
ventions managed by relevant development
authorities in KP and by relabeling taxes as user
fee for specific conservation services. Such
interventions fit into the category of narrow
and strong hypothecation of tax revenues
discussed in the review of international best
practice earlier.
For example, for solid waste management, a
system of waste collection and disposal could
be introduced where a nominal service fee is
charged from local businesses and resident of
the area. Such a system is already operational in
the Galliyat region under GDA and is financed
through conservancy charges which are a part
of the annual property tax collected by GDA.
However, according to private sector stake-
holders, places like Naran and Kaghan, which
receive the highest number of tourists every
year in KP, have nonexistent waste collection
and disposal systems leading to increased
pollution and degradation of the fragile
environment and ecology of the area. As a pilot
project, The Kaghan Development Authority
(KDA) could invest in a solid waste incinerator
for Naran and provide waste collection and
disposal services by charging a nominal fee
to local hotels and restaurants. The waste
incinerator can also be a waste to energy
conversion plant which burns municipal solid
waste to produce steam in a boiler that is used
to generate electricity. Such sustainable
interventions, if successful, can be scaled up to
other tourist areas. Moreover, fines can also be
imposed on hospitality service providers and
tourists if they litter or pollute the environment.
The development authorities and KPCTA have
such levies, fees and fines mandated, but few
have converted these into specific operational
programs.
Stakeholders from the Galliyat highlighted lack
of a sewerage system and treatment plant
facility in places like Nathiagali which has
resulted in the contamination of natural spring
waters used by the villages in the area - an
evident negative externality of increased
tourism and commercial activity on local
communities. It was suggested that instead
of imposing conservation taxes or an environ-
mental Cess, a workable model would be
through a public-private partnerships. For
example, GDA could make the initial invest-
ment by setting up the sewerage plant and the
private sector would pay user-charges for the
facility. The direct linkage of tax/fees with
service provision would create willingness to
pay and make the intervention sustainable.
Also relabeling taxes into user fee for a service
makes payments more palatable for the public.
21A Pigouvian tax is a tax on a market transaction that creates a negative externality, or an additional cost, borne by individuals not directly
involved in the transaction. Examples include tobacco taxes, sugar taxes, and carbon taxes.
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