Abstract
The current context caused by the COVID-19 pandemic, with the greatest impact on tourism, showed the countries´ economic dependence on this sector. In fact, tourism is fundamental for the economic development of a country and should be one of the priorities of the public policies of municipalities, as a stakeholder in the development of regions. In this sense, the present research focuses on the study of tax incentives to tourism of regional scope, and on the benefits granted to Portuguese companies with touristic utility statute. The authors conclude that the tax benefits understudy have not been a practice generally adopted by Portuguese companies and concentrated on a small number of municipalities in Portugal.
TopIntroduction
The purpose of this chapter is to discuss the importance of tax incentives as local policies to encourage the tourism sector. The tourism sector is fundamental to the economic growth and consequent employment of a country (Enilov & Wang, 2021; Souza et al., 2020; Chou, 2013). Therefore, tourism is one of the activities with the greatest potential for growth and job creation (Lopez & Arreola, 2019; Oneţiu & Predonu, 2013), so governments should establish relevant policies that boost the sector, including tax policies.
Now, as it is known reducing the tax burden is desirable, specifically in the form of tax incentives that can ensure increased business competitiveness (even more so in the current context of economic regression caused by the Covid_19 pandemic, with the tourism sector being one of the most affected).
Considering the global impact that Covid_19 had at the level of tourism, showing the economic dependence that regions have on tourism (Liang & Wu, 2022; Duro et al., 2021; Yang et al., 2020), tax policy should pay attention to businesses, particularly those in the tourism sector (Almeida et al., 2021; European Commission, 2017).
Tax benefits are an advantage, as they allow a benefit of a financial or social nature and translate into a source of value for businesses. For their holders (businesses), tax benefits comprise three features: one, the derogation from the general taxation rules; two, the achievement of relevant social and economic objectives, and three, the granting of a tax advantage. For Governments, as the tax system fulfills several purposes, tax benefits embody measures to motivate certain taxpayer´ behaviors, being measures of an economic nature and public utility, such as investment in certain sectors (Van Parys, 2012).
Thus, as far as tourism is concerned, in the case of Portugal, tax incentives have been permanenting in the Portuguese tax system, and even in 1954 the “Touristic Utility Statute” was established by law for hotels and similar establishments, with interest for tourism, at the level of exemption from property tax.
The present research has, therefore, as an objective the study of the tax benefit of the exemption from the Municipal Property Tax (MPT) of buildings in Portugal, to which has been attributed the “Touristic Utility”, and affected to the residential tourism, in an approach focused on the tax revenue ceasing. It was adopted as research methodology the case study of the Portuguese corporate beneficiaries, in the period from 2015 to 2019, and with particular focus on Portuguese municipalities and the tax benefits granted in the year 2019.
The authors consider that this study is of particular importance in the national context, namely in the current moment, given the pandemic caused by Covid_19, in which tourism activity in Portugal decreased by 80.8% compared to January 2020, which corresponds to a loss of 87%1 of overnight stays of foreigners in tourist accommodation. Consequently, tourism is a sector with a special need for attention.
Moreover, in the international context, this study is relevant to the extent that for Calero & Turner (2020) there has been certain neglect in the consideration of the tourism sector in research on the economic development of countries and the research at the regional level is still very scarce.
This research intends to contribute to the debate of the importance of tax policy and its impact on the competitiveness and attractiveness of the tourism sector.
This work is structured in five sections. Firstly, some preliminary considerations on the role of tourism in economic development will follow, presenting a brief comparison of international trends, at the level of tourism sector revenues. Secondly, the strategy of municipalities for tourism development will be addressed. Thirdly, the “Touristic Utility Statute” will be analyzed as a tax policy to support tourism businesses in Portugal. Fourthly, the authors analyze the data and discuss the results obtained. Fifthly, some outlines for future research are presented. Finally, in the sixth and last place, the main conclusions will be presented.
Key Terms in this Chapter
Touristic Utility Statute: The Touristic Utility Statute provides its beneficiaries with several tax incentives, namely exemption to property tax and property sales tax. The Touristic Utility Statute was established by law for establishments with interest in tourism, namely hotels, boarding houses and lodgings, pensions and hostels, restaurants and food houses, tea houses, cafes, breweries and bars, cabarets, and dance halls (dancing), and camping parks.
Gross Domestic Product (GDP): A term to describe the sum of all final goods and services produced by a country, state, or city, usually in a year.
Tax Benefits: Advantage or a tax relief regarding the normal tax regime, which can be an exemption, a rate reduction, deductions from taxable income, etc.
Property Tax: In Portugal, the property tax is called “Imposto Municipal Sobre Imóveis” (IMI) and it is a local tax, collected by the municipality where a certain building is located, and only the owners, in general, are responsible for its payment.
Touristic Accommodation: Establishments, houses, or activities in enterprises, including holiday villages, holiday flats, country houses, hotels, guest houses, rural tourism, etc.
Urban Building: Urban buildings are those properties, in general, which are built on and incorporated into the soil.
Property Tax Rate: Rate that ranges from 0.3% to 0.45% and differs from municipality to municipality, as each local authority has the autonomy to set its rates.