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FINANCING SUSTAINABLE TOURISM IN KHYBER PAKHTUNKHWA 2.1 Levies 2.2 Value-Added Taxes Tourism-specific levies usually include occupancy tax, entry and exit taxes, fees for hotels and tour licenses, beach and park admission fees, hunting and fishing permits etc. Before imposing levies governments must consider whether they can effectively generate revenue, and if they can be easily administered and complied with by taxpayers. Globally, revenues from levies are usually hypothecated. For example, in Nottingham, revenues generated from the Workplace Parking Levy (WPL) are ring-fenced for the initiatives undertaken under the Local Transport Plan. A consumer study from Italy demonstrates that consumers' willingness to pay (WTP) for tourism taxes is determined not just on the vacation and tourist type but also on how the revenue is used. Another important consideration in the imposition of levies is the recent rise in the sharing economy through digital platforms such as Airbnb. Charging levies on traditional accommodation, while ignoring accommodation accessed through the sharing economy can distort competition within the market. To address this, local authorities in Paris require platforms such as Airbnb to collect and remit tourist taxes on behalf of accommodation providers 11. Can levies be an effective tool to generate revenue from tourism The value-added tax (VAT) is an indirect tax which can be imposed on tourism-related goods and services. Literature suggests that tourism-specific VAT should be avoided to minimize compliance costs, in favor of an evenly distributed rate across all actors in the economy (Group NAO, 2020). Multiple rates can complicate tax administration and compliance and can create opportunities for rent-seeking. In some cases, governments have used VAT refunds as an incentive to promote tourism related services. For example, in Dubai, 5% of VAT is refunded for organizations who work in the exhibitions and conferences sector¹² 11 Local Government Association. A Tourist Levy: What, Where and How VAT REFUNDS can be implemented to promote tourism related services 12Group NAO (2020) Tourism Taxes by Design - White Paper 16

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