IL Feature

Taxing Times


The management of various popular destinations has imposed a tax on tourists in a bid to decrease their influx. But this is having a deleterious effect on the tourism industry which employs many people


 

Following the recent proposal by Calangute panchayat in North Goa requiring tourists to secure hotel reservations prior to entering the village, it has enacted a resolution to levy a “tax” on them. In a resolution passed during a meeting on June 7, the panchayat of Calangute, a popular tourist destination, noted the implementation of similar taxes in Maharashtra’s Mahabaleshwar and resolved to formally communicate with the district collector, police chief and government. The purpose of this communication is to request the establishment of checkpoints, supported by police personnel and panchayat staff, at five entry points to the village. These checkpoints will serve to verify the vehicles of all tourists, with the aim of “preventing and eliminating public disturbances”.

According to the panchayat, the decision was taken after several complaints about tourists creating ruckus and indulging in illegal activities which bring disrepute to the village.

“Tourists come in groups in jeeps and buses, stroll around the beach area and drink alcohol and cook in their vehicles. They do not make any hotel reservations. We have proposed to set up checkpoints for verification and to charge a passenger tax or an entry fee to deter such behaviour,” Joseph Sequeira, sarpanch of Calangute, who proposed the resolution, reportedly, said. The modalities of the tax will be discussed later if it is approved, he said, adding, “if it can be done in Mahabaleshwar, it can also be done here”. 

According to the panchayat, the resolution was held to discuss issues related to “public nuisance, garbage throwing, parking, cooking and eating in the open area on the road side by tourists visiting the Calangute beach and other areas in their vehicles”. It said that checkposts in Mahabaleshwar impose taxes such as a road passenger tax, a pollution tax, sanitary cess and an entry fee. “It is resolved to impose such taxes in the village panchayat Calangute. The panchayat is taking all the required steps to keep the area clean,” the resolution said.

Sequeira emphasised that the primary objective is not to generate revenue, but to ensure the cleanliness and maintenance of the village. “We will implement the decision only if the state authorities approve it,” he stated.

The beach village of Calangute had initiated a controversial proposal to monitor and impose taxes on tourist vehicles entering the area. This decision had sparked a debate among legal experts in the state. Former Advocate General Carlos Ferreira had dismissed the proposal as “unconstitutional”, “illegal” and “untenable”, while senior advocate and intellectual Radharao Gracias supported the panchayat’s stance, citing similar practices in other parts of the country.

Concerns have been raised about the logistical challenges of implementing the tax, given the high volume of tourist vehicles during peak season. Ensuring each vehicle is stopped and examined would be a daunting task for the authorities.

“No tax can be levied by the government, whether central or state, unless authorised by law, which means legislation, not an executive order. The same rule applies to local bodies like panchayats,” said Ferreira.

Similarly in 2023, the tourism industry of Himachal Pradesh was dealt a blow. The Himachal government’s decision to impose tax on all commercial vehicles registered outside the state not only caused a dip in tourist inflow, but left tour and travel operators an agitated lot.

The state government had issued a notification in July that year imposing a tax ranging from Rs 3,000 to Rs 6,000 per day per vehicle entering Himachal. The tax depends on the seating capacity of the vehicle and it came into effect from September 1. 

According to Mohinder Seth, president of Himachal Pradesh Tourism Stakeholders Association, the state government must roll back this tax. “Travel agents in places like Maharashtra and Ahmedabad are ditching Himachal for Uttarakhand and Kashmir. Why would they come to Himachal when they are being asked to pay through the nose? The state government must understand that instead of earning additional money through new tax, it’s losing more,” Seth reportedly said, adding that tourists from Gujarat, Maharashtra and West Bengal visited Himachal, mostly in groups and in buses and Tempo Travellers, from September till February.

“But presently, hotel occupancy throughout the state is at its lowest. This just means that travel agents don’t want to suffer losses by sending tourist buses and Tempo Travellers to Himachal anymore,” said Seth. He has also written to the state government asking it to withdraw its decision as no such tax was imposed anywhere else, including Uttarakhand and Kashmir. “The tourism industry of Himachal will never recover like this. First, it was Covid-19, then monsoon devastation caused huge losses. Now we have this,” added Sethi.

Vinesh Shah, Surat-based president of the Travel Agent Association of Pan India (TAAPA), reportedly, said: “Around 5 lakh Gujarati tourists, who were scheduled to visit Himachal at this time of the year are now going to Uttarakhand or Kashmir. The reason is simple. Why would we suffer losses by sending our vehicles to Himachal? The government is charging Rs 3,000 per day per Tempo Traveller from us. We have ended up paying more and earning less.”

According to Shah, TAAPA would request the Gujarat tourism ministry to mediate in the matter. “We are requesting the Gujarat tourism ministry to speak to the Himachal government to resolve the issue. Of the total tourists that visit Himachal annually, 25% to 30% are from Gujarat. Just imagine the setback the tourism industry of Himachal will face if these charges continue. Himachal is trying to increase its tourist footfall, but this surely is not the way to do it,” added Shah.

Last year, the Darjeeling civic body too decided to reintroduce tourist tax of Rs 20 per tourist coming there. This was after a gap of more than a decade. “The collection of tourist tax would start soon. A private firm has already been issued the order to collect the tax,” said Dipendra Thakuri, chairman of Darjeeling Municipality.

Darjeeling is a highly sought-after hill destination in India, renowned for its breathtaking views of Mt. Khangchendzonga, the third highest mountain globally. Annually, over a million tourists visit Darjeeling, contributing to its robust tourism industry. The hill station boasts approximately 400 hotels, catering to the diverse needs of its visitors.

“Hotels would collect tourist tax of Rs 20 per tourist irrespective of the duration of stay. The private company, which would be collecting the tax from hotels, would pay Rs 28.25 lakh per year to the municipality. This amount is far less than the total amount of the tax that would otherwise be collected from the tourists arriving in Darjee­ling,” said Ritesh Portel, former chairman of the Municipality and the leader of opposition Hamro Party.

The decision, however, met with criticism from opposition parties, which have appealed to the Bharatiya Gorkha Prajatantrik Morcha (BGPM)-led municipality to re-consider the decision. The decision to collect Rs 20 per tourist above five years of age from the hotels they would be staying in would have a dampening effect on the tourism industry and the civic body would also lose revenue, opposition parties said.

“Tourists arriving in Darjeeling are already over-burdened as they have to pay tax while entering multiple tourist locations like the Tiger Hill, which is famous for viewing the sunrise,” said Bharat Tiruwa, general secretary of the Gorkha Ekta Chalak Sangathan.

This is, however, not the first time Darjeeling Municipality has decided to levy tourist tax. It started in 2008. The levy per tourist was Rs 3 in 2011 and it was raised to Rs 10 per tourist in 2012. Thereafter, it was stopped as the process was cumbersome and most hotels did not cooperate.

These types of measures are not only being implemented in India, but also in various foreign countries, where tourism taxes are levied by the concerned authorities. Scotland recently introduced tourist taxes; it now gives its local authorities the power to introduce a visitor levy in their areas. Scotland has joined the league of countries like Bhutan, Japan, France, Switzerland, Germany, Italy, Spain, Greece, Belgium, Slovenia, Austria and many more in this regard.

Though the forms of these taxes and the methods of collection might be different, the end objective is the same—combat over-tourism and get visitors to pay for the up­keep and maintenance of the public spaces they visit.

In Tanzania, the government charges 18% VAT on tourist services like ground transportation, water safaris and camping fees. In some countries like Japan, the tourist has to pay the tax when he leaves the country. The taxes can be adjusted easily for different types of travellers. They are seen as a quick fix to the ill-effects of tourism, which is seen as unsustainable, harmful to the environment and inconvenient for local residents.

There is a popular perception now that the tourism industry generates its profits from places, people and the environment, but gives very little back. But many industry insiders argue that tourism tax is not a long-term answer and authorities should focus on responsible tourism planning and management. 

 

—By Abhilash Kumar Singh and India Legal Bureau