Tax reform that eases burdens on tourism and travel services companies and consumers is needed to support development within the sector and deepen its contribution to economic growth in the Asia-Pacific as demand for international travel increases within the region.

Progress towards more effective taxation regimes was made in recent discussions between tourism ministry officials from APEC economies and industry representatives in the historic Andes Mountain town of Cusco, the gateway to Machu Picchu. This pursuit is part of broader efforts to advance services trade in the region that will be in view during the APEC Ministers Responsible for Trade Meeting on 17-18 May in Qingdao, China.

“International travel and tourism is on the rise in Peru and across the Pacific but there is an opportunity for much greater industry growth,” said Magali Silva Velarde-Alvarez, Peru’s Foreign Trade and Tourism Minister, who will be at the table in Qingdao. “Lifting impediments on service providers, including opaque taxation regimes and unnecessary costs that are ultimately passed on to consumers, is needed to unlock the region’s market potential. APEC economies are now working actively to address this.”

APEC’s 21 member economies welcomed 355 million international tourists last year, propelling an industry that employs about 125 million people, according to World Travel and Tourism Council data.

Tourism is expected to deliver more than USD650 billion to the APEC region’s economy in 2016, when Peru will host APEC. Member economies could gain up to 57 million additional international tourism arrivals by that time, creating 2.6 million new jobs, based on the adoption of policy changes in areas such as taxation, the World Tourism Organization reports.

“Tax levels and how they are applied, for example, through air passenger duties, are major determinants of the cost of international travel which greatly influences demand,” explained Javier Guillermo, Lead Shepherd of the APEC Tourism Working Group. “When a tax regime is improperly structured, it can result in unprofitable air routes and service reductions, and weigh on the ability of travel and tourism companies to operate.”

APEC economies have launched a new joint project to promote tax reform within the industry.

“We will gauge the impact of current taxation measures and simulated modifications to them over time, in relation to travel and tourism demand, revenues and job growth,” noted Molina. “Our goal is to determine how to achieve more transparent, fair and equitable tax regimes to reduce barriers to tourism development.”

“The recommendations we put forward for tax reform, based on our project findings, must be relatively simple to understand so that unintended consequences such as new financial and administrative costs for businesses and travelers are avoided,” Molina added. “At the same time, a one-size-fits-all approach is unsuitable given the diversity of the region’s taxation systems and tourism sectors.”

The project will draw on business and consumer interviews and surveys, primary data collection and onsite assessments of issuing authorities in a cross-section of APEC economies. The findings will be examined by the region’s Tourism Ministers when they meet in September 2014 in Macau, China.

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