Affectability of Iran's Tourism Industry from the New VAT Law

Authors

Department of Tourism Economics, Tourism Research Institute, Academic center for Education, Culture and Research (ACECR), Tehran, Iran.

Abstract

The VAT law amendment in Iran, enforced since the beginning of 2022, includes three key changes in the VAT of the tourism industry: 1- tax exemptions in the transport sector (except for domestic air transport), 2- tax exemption in the accommodation sector (except for 4 and 5 star hotels), and 3- tax exemption in other tourism services, including travel agencies and attractions (except for domestic travel agencies). According to this law, and due to price change that occurs in the rate of providing tourism services in Iran, the cost that tourists pay to receive tourism services will also change.  The present study seeks to answer the question of how much this price change will change the final price of the product (or service). For this purpose, it uses the national input-output model. The input-output table for 2019, prepared in the conditions of economic stability and the absence of Covid-19 and its negative effects on tourism, has been updated. The results suggest that tax exemptions in the tourism sector will not have a significant effect on the whole economy and even in the tourism industry. However, tax exemptions on the services of travel agencies can be felt in this sector. Given the current very competitive price of Iran's tourism industry compared to other countries, it can be stated that these exemptions will not have a significant effect on the growth of foreign tourism in the country and domestic tourism will be affected slightly.

Keywords

Iranian Economic Review

Articles in Press, Accepted Manuscript
Available Online from 27 November 2022

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