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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. 27
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