Include taxes in your travel budget

August 16, 2023
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If you're planning to squeeze in an end-of-summer vacation, budget a bit more for added taxes.

The tax costs are being felt primarily by international travelers.

U.S. travelers, no longer so concerned about COVID-19, have embraced delayed European trips. Residents of the destinations are, for the most part, happy for the added income. However, in particularly popular disembarkation sites, the sightseers are contributing to local infrastructure stress.

Those visitors, say locals, should contribute to the area's upkeep and repairs. So tourist taxes have been instituted or increased this year in visitor-favored destinations such as Spain, Italy, Croatia, and Indonesia.

But the tax move is widespread.

Of the 30 nations surveyed in a 2020 report by Group NAO, a Copenhagen-based tourism consulting agency, 21 countries had taxes on tourist accommodations.

The taxes, which at the time of the report ranged from 0.50 to 3 euros (about 54 cents to $3.26 U.S.) per person per night, are more prevalent (and higher) in nations in southern and western Europe, according to the report. That's where tourism tends to represent a larger share of the national economies.

However, the tax trend has spread across the continent and beyond. Euronews compiled a list of countries charging tourist taxes in 2023.

Domestic travel taxes, too: Tourist taxes are not new. Similar charges have been common in the United States for decades.

Lodging taxes, assessed by states, cities, or both, have been common folio charges across the country since the 1970s. They typically are single-digit-percentage ad valorum taxes collected on short-term, overnight stays at hotels, motels, bed-and-breakfasts, and other lodging operations.

Reflecting the various stay options, the taxes go by various names, including hotel occupancy tax, hotel motel tax, room tax, bed tax, transient occupancy tax, and, cutting to the chase, tourism improvement tax. Like the monikers, the amounts also vary widely.

For most lodging taxes, state legislation defines the tax base, determines who is exempt from it, and establishes collection procedures. State, county, and local governments also often impose their own additional lodging taxes. Many government divisions create special districts to levy the added lodging taxes.

The 2022 HVS Lodging Tax Report, the 12th annual analysis by the global consulting firm focused exclusively on the hospitality industry, found that of the 150 largest U.S. cities it examined, more than 120 impose a dedicated tax, and all of them collect some form of taxation on hotel room revenue.

But lodging taxes are collected beyond metropolises. They've become an important source of funding for economic development initiatives in cities of all sizes across the county.

The taxes also are appealing from a political perspective. Lodging taxes tend to get more public support because visitors that pay them usually aren't constituents of the localities imposing the tax.

Taxing frequent flyers: While most of the tourist-related taxes in the United States and worldwide are used to pay for practical costs faced by local jurisdictions, some advocacy groups want to expand travel-related taxes to deal with broader issues, such as climate change.

That's the impetus for the latest push to tax frequent flyers.

A tax on those who spend a lot of time in the air is not new. But this year's heat waves have renewed interest in the charge.

Why focus on those who fly the most? A 2021 report from Possible, a United Kingdom based climate charity working towards a zero-carbon society, found that in almost all of the countries with the highest aviation emissions, a small minority of people occupy most of the airline seats.

The report's number show that —

  • In the United States, 12 percent of people take 66 percent of flights.
  • In France, 50 percent of flights are taken by 2 percent of the population.
  • In the U.K., 15 percent of the population take 70 percent of all flights.

This pattern, says Possible, is repeated across the world. The climate-change group also notes that in almost all countries, less than half the population flies each year.

Frequent flyers also tend to have higher incomes, says Possible.

That's why the group's proposed Frequent Flyer Levy is a progressive tax that increases as a traveler takes more flights, or flies greater distances, every year.

A frequent flyer tax still has a way to go before it gets broader acceptance. But it's an indicator that travel is an attractive area for taxation. Keep that in mind as you book your next trip.

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