I develop a theory of the jointly optimal choice of nonlinear income taxes and commodity taxes which accounts for the presence of tourists. If commodity taxes are uniform, the Pareto efficient rate is the one that maximizes revenue from tourists. Impacts of a uniform commodity tax on residents are irrelevant, as they can always be compensated through income tax changes. However, the presence of tourists in the tax base overturns the classic Atkinson-Stiglitz result justifying uniform commodity taxation. Efficient rate differentiation is characterized by a Corlett–Hague-style rule which requires placing lower taxes on goods which tourists can more easily substitute for expenditures outside of the destination economy. Notably, the impact of commodity taxes on residents do not influence the pattern of efficient differentiation nor of the overall level of commodity taxation. Taxes should also be lower on goods consumed by tourists who are highly responsive at the extensive margin.

We study the behavioral responses, fiscal consequences, and housing market reactions that result from raising a tax on second homes. To this end, we compile data on German municipalities and apply staggered difference-in-differences methods. Our results suggest that people (massively) avoid the second home tax by changing their status of registration. As a consequence, we observe a rise in the number of primary residents registrations, which in turn increases formula-based intergovernmental transfers. We do not find evidence for housing market responses.

This study provides new econometric evidence on the effects of holiday vouchers on the development of the domestic tourism sector and on their advantages and disadvantages. We use an unexpected policy change that took place in Romania and made mandatory the provision of holiday vouchers for all public sector employees, which increased eight-fold the value of holiday vouchers used. Using novel firm level data on payments in holiday vouchers and difference-in-differences methods, we show that this policy significantly increased the revenues and employment of firms in tourism sector that used holiday vouchers compared to similar firms that did not use them. Regarding the underlying channels, we show that holiday vouchers increased tourism related economic activity in less touristic regions, but in the most touristic regions, they, mainly, increased prices and prolonged the touristic season. They also increased income declaration of the firms most exposed to informal economy.

Tourism is a key income source for many businesses and policy makers alike while also exerting negative externalities to local economies. We provide novel causal evidence on how local taxation of overnight stays among German local governments affects tourist flows. Using event study analysis and synthetic differences in differences we show that taxing overnight rates of hotels decreases hotel occupancy rates at the municipality level. Touristic towns, however, have less elastic demand responses to tourist taxes. Exploiting large-scale scraped hotel price data from booking.com, we show that there is indeed substantial pass-through of tourist taxes on hotel overnight rates.