Tourist taxes are here to stay. And that may not be a bad thing

In just a handful of years, visitors to Iceland have spent billions of US dollars traveling to see “Europe’s prom queen.” And as they’ve posed with fluffy horses, taken selfies next to waterfalls, and driven camper vans all over the small island nation, they’ve overburdened the country’s natural resources and had an outsize impact on the country’s contribution to climate change. From 2010 to 2015, Iceland’s carbon footprint tripled, according to one study conducted by the University of Iceland.

It’s time, Iceland says, for tourists to pay the price for these costs. And that comes in the form of tourist taxes.

The country hasn’t yet announced exactly what that cost will be, but the fees are intended to counteract the impacts of overtourism, and to capture revenue from tourists visiting on cruise ships. “Tourism has really grown exponentially in Iceland in the last decade, and that obviously is not just creating effects on the climate,” Icelandic Prime Minister Katrin Jakobsdottir told Bloomberg. “It’s also because most of our guests who are coming to us are visiting the unspoiled nature, and obviously it creates a pressure.”

Such taxes aren’t new. Bhutan has long charged tourists hundreds of dollars per day as a sustainable development fee, only dropping the tax to USD$100 per person per day earlier this year as a temporary measure to encourage more visitors. Other cities and countries are also starting new fees this year, or implementing them soon. Japan has announced a new tariff for visiting the island of Miyajima, where there’s a popular shrine, and Venice is moving forward with a 30-day trial of charging a five-euro day fee for out-of-towners. Recently, Amsterdam announced they will be raising their tourist tax to 12.5 percent in 2024—making it the highest tax of its kind in Europe. 

“The tourist tax will be further increased to fund the extra spending so that visitors make a bigger contribution to the city,” the city wrote in a statement. “This will also help tackle overtourism and mean that the financial burden for Amsterdammers and Weespers will not increase.”

In 2024, travelers will pay an average tax of EUR€21.80 ($22.91) per night with an average room rate of €175 ($183.90), according to the city. Travel + Leisure reporting calculates an increase from the previous average tax of €15.25 ($16.03) per night. The tax for cruise passengers will also rise from €8 ($8.41) to €11 ($11.56) per person, per day.  

As with anything tax-related, not everyone is on board with these fee structures. In the case of tour operator taxes in India, mass confusion over inconsistent tax announcements could be hurting local travel companies, according to industry news source Skift.

Reports published this summer detailed ever-changing tourist tax guidelines in India that have actually hurt local tour operators. One announcement in February raised taxes on trips purchased from Indian tour operators from 5 percent to 20 percent. Then, in May, the finance ministry said travelers wouldn’t need to pay any taxes if the tours cost less than USD$8,500 and were purchased with an international credit or debit card. The flip-flopping makes it harder—if not impossible—for local operators to compete with international outfitters whose money doesn’t stay in the local community.

But tourist taxes can also be an effective way to improve sustainability measures in mass-tourism destinations, according to one study published last year in the International Journal of Tourism Research.

It’s not just the money itself that’s helpful, as awareness campaigns about the reasons for such taxes can help shape people’s attitudes and behaviors. The IJTR study found that about 75 percent of respondents to a survey about a tourist tax in Andalusia, Spain, were in favor of paying fees to help the destination. This willingness to pay “establishes an adequate starting point to begin real progress toward sustainable management of an unsustainable mass destination,” the study concluded.

Time will tell whether tourism taxes can make a meaningful difference to support local destinations in achieving sustainability goals, conserving natural resources, and funding important local infrastructure. Up until this point, taxes haven’t diminished the popularity of most of the destinations that charge, so cities and countries alike have an opportunity to put the incoming tax dollars to the test. 

Many experts in the field believe the increase in tourism taxes isn’t a trend that may fail, but instead, it’s the sign of a new era of travel.

“The big question that’s on the mind of many local communities is, ‘how can we capture the value of tourism?’” Peter Rømer Hansen, a founding partner and the chief strategist at Group NAO, a Copenhagen-based tourism consulting agency, told the New York Times. “Back in the day, it used to be that tourism was tax-free. Now it’s like, ‘No it’s not—you should tax tourism to capture some of that value to add to the community.’ It’s a paradigm shift. It’s part of this zeitgeist that we need to be more conscious and take better care of our local environment.”

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