Effect of tax incentives on the Colombian hotel sector

Abstract

Recent governments have introduced tax incentives to promote investment and increase the quality of tourist services. In particular, the lodging sector has received differential treatment in direct and indirect taxes. A clear example of this type of tax stimulus is Law 788 from 2002, which resulted in an unprecedented increase in hotel capacity in Colombia. However, some fiscal and tourism experts have viewed this type of incentive as discriminatory, because it benefits the few. They also argue that the government fails to collect significant tax revenues that could be invested in the same infrastructure required by the tourist sector for its development. The purpose of this paper is to measure and analyze the impacts of these fiscal and tax policies on the operation and management of the lodging sector of Colombia.