Despite its residual revenue, gov’t should not scrap the tax due to its versatility, economist says

[Photo: Renato Marques]

Despite accounting for a very small share of local government tax revenue, the tourism tax might have some additional positive aspects that contribute to the decision to keep this form of duty active, economist and associate professor of business economics at the University of Macau’s Faculty of Business Administration, Professor Henry Lei, told the Times.

According to information provided by the Financial Services Bureau (DSF) to the Times in response to an inquiry, the recent changes in the number and types of businesses that are subject to the 5% levy are expected to result in a 50% reduction in regular revenue from this tax.

“Starting from July 1, 2026, for establishments exempted from tourism tax pursuant to the provisions of Article 4(e) of the tourism tax regulation, as amended by Article 45 of Law No. 5/2026, tax revenue is expected to decrease by approximately MOP750,000,” the DSF said, adding, “The relevant tourism tax amount collected for the fiscal year 2025 is approximately MOP1.5 million.”

Questioned by the Times on the matter, Lei noted the tax’s versatility and flexibility in its applications as strong points against scrapping the duty.

“As a whole, my position is to support the maintenance of the tourism tax, which may offer the SAR government more flexibility in the implementation of demand control policies, if necessary in the future,” he said, adding that this tax also has the “possibility of treating tourism tax as a potential source of fiscal revenues in the process of tax source diversification in the future.”

Lei remarked that “despite the insignificant amount of tax revenue, the tourism tax is an important policy instrument that the SAR government should retain for flexibility.”

The economics scholar argued that this tax also offers the possibility of expansion in terms of percentage or volume, “in light of over-tourism,” for instance, if a consensus on the matter is later reached in society.

In such cases, Lei noted, “it is possible to make use of this instrument to levy taxes (or to withdraw the exemptions) to tackle overdevelopment, similar to what has been done in some tourism cities in the world, such as Kyoto in Japan and Venice in Italy (these cities charge head-count taxes directly).”

The same expert reaffirmed the possibilities of the levy in the medium and long term, noting that “after Macau has established its role as, for example, the center of mega events in China or East Asia, with stable and inelastic flows of tourists, it [tourism tax] could contribute significantly to the stream of this tax, helping to reduce our reliance on gross gaming revenue [and the subsequent taxation of those revenues].”

In perspective, annual revenue from the tourism tax in 2025 was MOP1.5 million, out of a total of MOP114.64 billion in taxes collected that year, of which 82.7% (MOP94.85 billion) came from gaming taxes.

According to official figures, tourism tax accounted for 0.0013% of all taxes collected by the government in 2025.