Industry expert Antonio Escudero provides clear answers to common questions about the tourism tax. He discusses the best moment to raise political topics, the potential economic effects, the cost versus the benefits, and how deferred and voluntary implementations might work.
Is now the right time to address the tourist tax debate?
For years this issue has been in the spotlight. It resurfaced after the pandemic as an election promise, and regional and city councils still have the authority to decide how to proceed in the coming years. The timing remains politically sensitive, with municipalities weighing public opinion, economic forecasts, and the potential impact on travel patterns.
How is the economic impact of the tax evaluated?
The outcome hinges on the price elasticity of demand for tourism. Since the tax has not yet taken effect, the exact elasticity is not known. If visitors to a destination like Alicante face a higher nightly rate because of the tax, the overall cost of a stay rises and demand could fall. Whether that decline is small or substantial depends on how sensitive travelers are to price changes. Economists generally estimate that the rate will be modest and that any reduction in demand will be limited, with somewhat larger effects in destinations that rely on low-cost carriers or peak-season markets.
What are the debates among different political groups?
There are contrasting analyses. One group, including tax policy researchers from the University of Valencia, argues that demand will decrease only modestly because the tax is inelastic and that higher revenue from the tax can counteract negative externalities such as municipal cleanup costs and environmental improvements. They also highlight reductions in noise and other local disturbances as indirect benefits. Conversely, scholars from the University of Alicante and other institutions contend that demand could be considerably more elastic, leading to a larger drop in tourist numbers in response to the tax.
What is the cost–benefit ratio of the fee?
While the author is not a Tourism Economics specialist, the tax is presented as a tool to modestly curb demand while generating revenue to mitigate negative externalities. A daily rate in the range of a fraction of a euro to one euro could strike a balance between preserving tourism activity and funding local improvements. In practice, the overall effect depends on how travelers respond to small price adjustments and how effectively the revenue is reinvested in the areas most affected by tourism growth.
What is meant by a deferred and voluntary tax?
Given that tourism has not yet fully recovered from disruptions, it seems reasonable to allow municipalities to postpone the tax implementation temporarily. The idea is to give local authorities flexibility while monitoring the rebound in visitor numbers. As for voluntary participation, certain councils already employ similar mechanisms where compliance is encouraged rather than mandated, with results varying by region and season. The ultimate aim is to balance short-term recovery with long-term sustainability, ensuring that communities continue to benefit from tourism without bearing excessive burdens.