Tourism in Malta : a taxation perspective

Abstract

Purpose: This study looks into inbound tourists’ knowledge and perceptions of the tax burden of tourism-related taxes in Malta, as well as their willingness to pay such taxes based on their sociodemographic characteristics and tripographic profiles. The study's goal is to obtain a better understanding of tourists’ perspectives on tourism-related taxes. Design: In order to collect the primary data, a quantitative methodology was used. A questionnaire-based research instrument was developed to target respondents that had spent at least one night in Malta as tourists. Findings: Most of the tourists were more aware of the VAT on tourism related services than the eco-contribution. Additionally, the majority believe that the tax burden on restaurants is the greatest and that lowering the taxes would result in a higher budget allocation for restaurants. The majority of the inbound tourists deemed that the current ad quantum method as the most equitable method of calculating the eco-contribution and were generally willing to pay a mean of €1.44 per night for the eco-contribution on accommodation, with income and expenditure per night being statistically significant factors determining this. Moreover, 74.1% of the visitors were also willing to pay more than the current €5.00 maximum ecocontribution per visit. Meanwhile, the tourists indicated that their preferred use of the tourism taxes collected by the government is for the preservation of historical heritage. The findings also reveal the maximum VAT rate that most tourists were willing to pay for tourism-related services; this rate does not exceed 5% for all the service categories studied. Most of the respondents also stated that they would be willing to pay more in taxes to ensure environmental sustainability, mostly for transportation. Conclusions: The findings suggest that there is scope for increasing the eco-contribution and the maximum ceiling provided that the expenditure of the tax revenue collected is earmarked towards the tourists’ preferred choice (i.e., the preservation of historical heritage). A reduction in VAT rates for restaurants and sustainable transportation may be considered after more research is carried out on the economic impact. Value: The study provides policymakers with a new perspective directly from inbound tourists, which should be considered when designing tourism taxation or determining whether there is scope for revising the current tourism taxation landscape.