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The economic benefits of tourism

Tram, Lychakivska Street, Ukraine, Lviv
Definition of tourism
One of the most used definitions for tourism is the one by the World Trade Organization (WTO). The WTO defines tourism as “…the activities of persons travelling to and staying in places outside their usual environment for not more than one consecutive year for leisure, business and other purposes not related to the exercise of an activity remunerated from within the place visited.”

Another definition by Mathieson and Wall, 1982, is also worth nothing. They wrote in 1982 that tourism is “The temporary movement of people to destinations outside their normal places of work and residence, the activities undertaken during their stay in those destinations, and the facilities created to cater to their needs.”

From the above, one can define tourism as the non-permanent movement of a person from his or her place of abode to another place for purposes not limited to business, leisure and pleasure but not receiving any monetary compensation for it. It includes staying in places provided by others for free or paid for and using facilities created for the benefit of making life easy during their stay.

Injects money into the local economy
One of the very important economic benefits of tourism is the added income that it generates for the local people and their businesses. When tourists enter a locality, they spend hard cash. Many of the businesses in the tourism sector are micro-operators so when tourists spend, it goes directly into their businesses for their personal benefits and for the payment of their workers. Each dollar that is spent by a tourist is directly injected into the local economy.

Payment of taxes
Another form of economic benefit of tourism is income to the state and local government depending on the country of destination. Those who earn money pay taxes to the state as income tax. Apart from that, in countries where the Value Added Tax (VAT) operates, everybody who spends on one item or the other not exempted from the VAT list, adds something little to the coffers of the state.

Payment of levies
In every country, there are levies to be paid by operators of businesses and this does not exclude businesses in the tourism sector. There are different kinds of levies in the tourism sector depending on the particular country. Some countries charge hotel levies and restaurant levies. In some countries too, Tour Operators pay a form levy to the state. All these and other levies paid by entities in the tourism sector serve as a source income for the state and therefore an economic benefit of tourism.

Payment of fines and licenses
Another source of economic benefit from tourism is licenses and fines. Many operators in the tourism sector are expected to register their operations with one government agency or the other, mostly agencies under the Ministry of Tourism. Such registrations and their annual renewals are paid for. Any business entity that breaches this provision is fined by the appropriate authorities. The levies and fines therefore serve as sources revenue to government.

Balance of payments
Another economic benefit of tourism is that it can positively affect the Balance of International Payment (BoP) of the country of destination. Balance of International Payment simply means the record of all economic transactions between people who reside in one country and those who reside in other countries. Tourists who visit a country also spend cash and this is included in the final record of financial transactions constituting the Balance of Payment. In other words, another benefit of tourism is that it improves the destination country’s Balance of Payment.

Foreign exchange earnings
Tourism serves as a foreign exchange earner for many countries. For countries with very popular tourist sites with annual visitation in the hundreds of thousands or in the millions, such countries earn millions of dollars in annual income from foreign tourists. When tourists visit a country, they come with money which they invariably expend into the economy of the country of visitation. All the dollars, British pounds, Japanese yen, etc, that is injected into the local economy by foreign visitors serve a source of critical foreign exchange for the country of destination.

1. a. Define tourism.
     b. Highlight five economic benefits of tourism to your country.

The social benefits of tourism

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