Tourist Taxes in Italy: The Choices of the Policy Makers and the Preferences of Tourists

According to the Polluter Pays Principle, a tourist tax should be used to reduce the negative externalities generated by tourism. In Italy, instead, local administrators use it primarily to levy fiscal revenues and know very little about tourists’ preferences for this fiscal policy. The purpose of the paper is to describe the choices of the policy makers in setting the tourism tax and to compare them with the preferences of tourists in particular with reference to the tax rates and the earmarking chosen. To this aim in May 2019, we performed a Contingent Valuation experiment interviewing a sample of 884 Italian and international tourists staying in Trieste, the capital of Friuli Venezia Giulia, a region in the northeastern part of Italy. We asked the respondents the most they would be willing to pay for the tax and how their willingness to pay would change according to how the revenue raised would be spent. We tested the four types of allocation set by the Italian law introducing and regulating the tax since 2011. Analyzing the tourists’ preferences, we find that the acceptability of the tax significantly increases when the respondent knows that the tourist tax is earmarked. Moreover, we find that the willingness to pay is highly influenced by the tax earmark. If the revenue allocation is unknown, tourists’ willingness to pay for the tax is very low, however if the fiscal revenues are used for environmental protection or for the maintenance of the historical and architectural heritage, tourists’ willingness to pay significantly increases. The willingness to pay is also influenced by the tourists’ socio-demographic characteristics and by the journey type they choose. The policy implications of our empirical results are drawn and an action framework to analyze the tourists’ preferences and to enhance the effectiveness and efficiency of the tax planning process is proposed. To the best of our knowledge, no other paper before has ever estimated, the willingness of both international and domestic tourists to pay the Italian tourist taxes using a Contingent Valuation experiment. In fact, although this paper builds on a previous research carried out by the author, it substantially differs from the previous study with respect to the tourism type analyzed, the location where the data are collected and the type of tourists interviewed. Moreover, differently from the previous research, it also compares the tourists’ preferences for the revenue allocation with the allocation actually chosen by the local administrators.