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Is Hawaii's Hotel Room Tax Law Obsolete?
With tax collections falling behind expectations, State lawmakers are pressuring the tax department to increase effort to collect uncollected taxes from internet sales.* In 2015 the State Attorney General’s Office scored a “major” victory when the Hawaii Supreme Court ruled that online travel companies (OTCs) are required to pay Hawaii’s general excise tax (GET) on their hotel bookings. Subsequently, the Tax Appeal Court ordered OTCs to pay $53.1 million in back general excise taxes plus interest to the state.
*Source: Honolulu Star Advertiser, “Collection of online taxes pushed,” January 29, 2017.
The Exorbitant Cost of Collecting Honolulu’s Rail Surcharge Tax
Act 247, SLH 2005, granted counties the authority to impose a county surcharge of no more than 0.5% on gross income that is subject to the State’s GET [General Excise Tax] at the rate of 4.0% to fund county public transportation systems... The City and County of Honolulu was the only county to adopt the surcharge, which took effect on January 1, 2007. The State keeps 10.0% of the collections from the county surcharge as administrative costs, and Honolulu County receives the remaining 90.0% of the collections.
Hawaii’s State Government has unnecessarily profited from the Honolulu rail project. It is time for State lawmakers to rethink the 10% administrative fee. Right now, it is exorbitant. A more reasonable fee is between 0.5% and 1.0%.
How Hawaii’s State Government Shares Transient Accommodation Tax Revenues With Its Local Governments
Many states in the U.S. give unrestricted financial support to their local governments. The reasons some state governments provide aid and others do not, and why a particular mode of revenue sharing is adopted remain unclear. This paper examines Hawaii’s recent effort at developing a model to allocate the state’s transient accommodation tax revenues between the State and the county governments. The paper documents the process and explains the rationale behind the model.
Creating Tourism Improvement Districts to Raise Stable Funding for Destination Marketing and Promotion
Tourism Improvement Districts (TIDs), modeled after the more well-known Business Improvement Districts (BIDs), are increasing rapidly in the U.S. With enabling legislation from state and local governments, TIDs allow hoteliers in a tourist destination to ban together to impose compulsory assessments on nearly all the hotels in the district in order to raise money to fund destination marketing. To date, research on TIDs have come almost exclusively from destination marketing organizations (DMOs), travel associations, TIDs, and consultants with vested interest in the formation and expansion of TIDs. This paper synthesizes information from available reports and attempts to provide a more balanced view of the role of TIDs in destination tourism marketing and promotion.
Creating "Paradise of the Pacific": How Tourism Began in Hawaii
This article recounts the early years of one of the most successful tourist destinations in the world, Hawaii, from about 1870 to 1940. Tourism began in Hawaii when faster and more predictable steamships replaced sailing vessels in trans-Pacific travel. Governments (international, national, and local) were influential in shaping the way Hawaii tourism developed, from government mail subsidies to steamship companies, local funding for tourism promotion, and America’s protective legislation on domestic shipping. Hawaii also reaped a windfall from its location at the crossroads of the major trade routes in the Pacific region. The article concludes with policy lessons.
The Growing Importance of Tourism in the Global Economy and International Affairs
For tourism-dependent countries and destinations, tourism’s share of GDP can exceed twice the world average. Today, international tourism receipts exceed $1 billion per year in some 90 nations. Worldwide, domestic tourism is typically several times larger. Tourism truly has become a global economic and social force.
- by Carl Bonham and James Mak
Full Published Article: Bonham, Carl, and Mak, James. "The Growing Importance of Tourism in the Global Economy and International Affairs." Georgetown Journal of International Affairs. Edmund A. Walsh School of Foreign Service, Georgetown University, 22 July 2014.
Are Hotel Property Taxes Fully Passed on to Hotel Guests?
Recent research on the excise tax effects of the property tax in small, multi-sector open economies suggests that the property tax may not be fully forward shifted to consumers as previously believed. I adapt this analysis to examine whether local hotel property taxes in Hawaii are fully passed on to hotel guests as lawmakers had intended. We conclude that full forward shifting is unlikely. I argue that an excise/sales tax on hotel occupancy is preferable to the property tax as a tourist tax.
Published Version: Mak, James. "Research Note: Are hotel property taxes fully passed on to hotel guests? Implications from recent research on property tax incidence." Tourism Economics 21.4 (2015): 899-905. Web.
How China’s Approved Destination Status Policy Spurs and Hinders Chinese Travel Abroad
China’s “Approved Destination Status (ADS) policy allows citizens of mainland China to take pleasure trips abroad on group package tours to countries that have negotiated and implemented agreements with China. In this paper, we examine the reasons for this unique preferential and incremental travel liberalization system and how it affects mainland Chinese outbound pleasure travel.
What Should Be the Appropriate Tax Base for Online Travel Companies' Hotel Room Sales?
This essay examines the current dispute between state and local governments in the U.S. and online travel companies (OTCs) over the appropriate hotel occupancy tax base for online hotel bookings. It addresses the question of what should be the appropriate tax base in designing hotel occupancy tax statutes. It argues that the appropriate tax base should be the full rental prices of the hotel rooms paid by consumers inclusive of online travel company markups and service fees and not the discounted net rates paid by the OTCs to their hotel suppliers.
How Big? The Impact of Approved Destination Status on Mainland Chinese Travel Abroad
China’s Approved Destination Status (ADS) policy governs foreign leisure travel by citizens to ADS-designated countries. To model the effects of ADS on Chinese visitor arrivals, we specify a model of demand for a representative Chinese consumer who values trips to n differentiated foreign destinations. Using panel data for Chinese visitor arrivals for 61 countries from 1985 to 2005, we estimate fixed effects models accounting for selection effects and a semiparametric matched difference-in-differences (DID) model. The semiparametric matched DID estimates indicate that ADS increased Chinese visitor arrivals annually by 10.5 to 15.7 percent in the three-year period following ADS designation.
The Direct and Indirect Contributions of Tourism to Regional GDP: Hawaii
After two decades of development and refinement, the Tourism Satellite Account (TSA) has been touted as the most comprehensive way to measure the economic contribution of tourism to a destination's gross domestic product. However, recent literature has pointed out that the TSA is deficient in that it does not yield the indirect contribution of tourism to GDP. This paper shows that the TSA cannot be used to estimate the indirect contribution unless the import content of tourism is zero. The indirect contribution can be estimated using input-output (I-O) multipliers. We illustrate using Hawaii as an example.
Technical Progress in Transport and the Tourism Area Life Cycle
Richard Butler’s tourism area life cycle envisions tourism destinations to evolve in stages from exploration to rapid growth followed by slackening, stagnation, and even decline. The eventual slow-down in tourism growth is attributed to the destinations reaching their physical and social carrying capacities. This article examines the evolution of Hawaii as a tourism destination from 1922 to 2009. We demonstrate that tourism growth in Hawaii has declined but not because the destination has reached its carrying capacity but primarily because of the slowdown in technical progress in passenger air transportation and competition from newer destinations. We conclude that for destinations that depend on transportation improvements to attract tourists, technical progress in transport may provide a better explanation of the evolution of their destinations than their carrying capacities.
Using the Property Tax to Appropriate Gains from Tourism
This paper describes and evaluates the merits of Kauai County’s use of the property tax to capture rents from tourism and provide property tax relief to local homeowners. Because tourist accommodations are more capital intensive than other real estate, Kauai’s proposal to split the standard uniform rate into two separate rates—one on land and the another higher rate on improvements—results in heavier tax burdens for the tourist industry relative to other sectors of the local economy. We conclude that such an approach works well for Kauai and communities that desire slower and lower density development but may not work as well for others that wish to encourage tourism investment.
Small State, Giant Tax Credit: Hawaii’s Leap into High Technology Development
This paper chronicles the evolution of Hawaii’s high technology tax credits, describes their provisions and the ensuing problems in attempting to ascertain whether or not they have achieved the results desired by lawmakers who passed them, and offers lessons that other states can use when designing their own business investment tax credit programs.
Published: Kato, A., S. LaCroix, J. Mak. 2009. Small State, Giant Tax Credit: Hawaii's Leap into High Technology Development. Pages 641-652 State Tax Notes. Tax Analysts, Falls Church, Virginia.
The Contribution of the University of Hawai‘i at Manoa to Hawai‘i’s Economy in 2007
The University of Hawai‘i at Manoa (UHM) had its beginnings in 1907 as a college of agriculture and mechanical arts. In 1912, the first permanent building was erected in Manoa valley in UHM’s current location. With the establishment of the College of Arts and Sciences in 1920, the College of Hawai‘i became a university. Statehood and the establishment of the University of Hawai‘i as the "state university" marked the beginning of a period of accelerating enrollment that resulted in the formation of a large diverse system. In 1965, the State Legislature created a statewide system of community colleges and placed it within the University of Hawai‘i, and in 1972, the flagship Manoa campus became the University of Hawai‘i at Manoa.