COVID-19

The law and policy of VAT tourist tax refund schemes: A comparative analysis

Vol: 
19/2021
Author name: 
Wang, T
Stewart, M
Year: 
2021
Month: 
December
Abstract: 

Many Value-Added Taxes (VATs) or Goods and Services Taxes (GSTs) include a tax refund scheme for goods acquired by tourists when they visit the jurisdiction, and then return home. The policy, design and operation of tourist tax refund schemes have not been widely researched in the literature. This paper fills this gap and provides a detailed discussion of the policy, legal design and administration of tourist tax refund schemes. The paper first explores the policy rationale for the establishment of tourist tax refund schemes. It identifies three main rationales: the destination principle which is the basis for most VATs; the goal of providing an incentive to the tourism industry; and the principle of equity, or fairness. The paper explores the policy issues and tax risks that should be considered by countries seeking to establish, or administer, such a scheme and compares key elements of the legal design of tourist tax refund schemes around the world. The paper does an analysis of the main elements of the European Union VAT tourism tax refund scheme and then focuses on a detailed comparative case study of the design and administration of the tourism tax refund schemes in the GST of Australia and the VAT of the People’s Republic of China. The analysis reveals that different countries have different policy goals and design elements in their tourism refund schemes and face different operational challenges in their implementation. The authors recommend improvements to the design and administration of the schemes in Australia and China in light of the policy and comparative analysis.

Publication file: 

Updated:  19 April 2024/Responsible Officer:  Crawford Engagement/Page Contact:  CAP Web Team