Italy, home to iconic destinations like Venice and the Italian Riviera, has been particularly impacted by overtourism. In response, a new draft decree has emerged to increase the current tourist taxes from €5 to between €10 and €25 per night.
Tourist tax is not a new phenomenon, with over 14% of the world’s countries adding this tax to accommodation in popular destinations:
What is the Tourist Tax?
The tourist tax is a municipal levy charged per night per guest in popular tourist destinations. It’s often mistaken for Value Added Tax (VAT), which is a tax on general consumption. Unlike VAT, the tourist tax is specifically designed to address the strain on infrastructure caused by large numbers of visitors.
Currently, Italy imposes a €5 tax per night on tourists staying in short-term rentals, hotels, and vacation properties. However, under the proposed decree, this could increase to a minimum of €10 and a maximum of €25 per night.
How Does it Work?
The tax is currently applicable in provincial capitals and select tourist municipalities and is based on the duration of a guest’s stay. The draft decree, however, suggests extending this tax to all Italian municipalities. Accommodation providers are responsible for collecting and remitting the tax, adding an administrative layer for hotels, short-term rental hosts, and holiday companies.
A Balancing Act
Italy’s proposed tourist tax increase presents both opportunities and challenges. While the additional revenue could fund vital infrastructure improvements and help manage overtourism, concerns remain about potential misallocation of funds and the added burden on local businesses.
From a global tax perspective we expect to see an increase in these types of stealth taxes (indirect taxes) to raise funding for governments without impacting voting support.
Written by Khutso Makgoka