Reform the travel tax but safeguard tourism funding
Calls to abolish the travel tax are growing louder and the frustration is understandable.
For many Filipinos and resident foreigners, the levy feels like an added penalty for traveling abroad. But as policymakers revisit this issue, there is an uncomfortable but essential truth that must be addressed: Abolishing the travel tax without a clearly defined replacement funding mechanism for the Tourism Infrastructure and Enterprise Zone Authority (Tieza) risks weakening one of the country’s key enablers of tourism growth and regional development.
Current framework
Under the current framework, 50 percent of travel tax collections fund Tieza. This matters because Tieza’s core function—financing and coordinating tourism-related infrastructure—is not discretionary. It is foundational.
Tourism enterprise zones, access roads to emerging destinations, wastewater treatment facilities in island communities, public spaces, and heritage site rehabilitations are not “nice-to-have” projects. They determine whether destinations can support sustained visitor activity, private investment, and long-term economic participation.
From a development and investment standpoint, the relationship is consistent. Public infrastructure investment reduces risk and improves project viability which then unlocks private sector capital.
Developers and investors do not deploy resources into markets where access is unreliable, utilities are inadequate, or basic public infrastructure is missing. The risk premium becomes too high, returns become too uncertain, and projects stall.
However, when government provides the enabling infrastructure—roads, water systems, sewerage, ports, and public amenities—private capital is far more likely to follow. Hotels are built. Supporting commercial activity emerges. Jobs are created. Local economies diversify.
This is not theoretical. It is a familiar pattern across the archipelago, particularly in areas where tourism has become a primary pathway for regional development.
To be clear, Tieza should not be beyond scrutiny. There is room to demand stronger transparency, clearer project prioritization, faster implementation, and greater accountability.
Those discussions are necessary. But the existence of a dedicated, stable funding mechanism for tourism infrastructure is not optional. The mechanism can and should be reformed.
However, the underlying function—sustained investment in destination readiness—must remain intact.
Competitive environment
The Philippines cannot simultaneously express concern about tourism underperformance relative to regional peers while weakening one of the funding streams that supports destination development.
The competitive environment across Southeast Asia is increasingly defined by infrastructure investment. Neighboring countries are investing aggressively in the systems that make tourism markets viable—access roads and expressways, ports and marinas, wastewater and utility systems, and public destination infrastructure.
Indonesia is developing access and utility infrastructure in priority tourism zones. Vietnam continues to roll out expressways and upgrades to unlock coastal and regional tourism corridors.
Thailand has maintained systematic destination modernization over decades. Cambodia is expanding eco-tourism and resort infrastructure with clear strategic intent.
These moves are not incidental. They reflect a shared understanding that tourism infrastructure is a prerequisite for capturing regional and global travel demand and for attracting long-term private investment.
Funding architecture
This is why the policy conversation should not focus solely on whether the travel tax is unpopular. The real issue is whether the Philippines is prepared to replace the funding architecture that supports tourism infrastructure.
There is a legitimate case for reform. The current system can feel punitive and inefficient. There may be room to review the rate, consider exemptions for frequent travelers, improve collection mechanisms, or redesign the structure entirely.
But eliminating the travel tax without a concrete and funded alternative is not reform—it is simply dismantling a revenue stream without addressing the consequences.
If the travel tax is removed, funding must come from somewhere. General appropriations would require tourism infrastructure to compete annually with healthcare, education, and national infrastructure priorities.
A new tourism levy may be feasible, but it must be clearly defined, legally structured, and transparently administered. Expanded reliance on public-private partnerships may play a role, but private capital does not finance public infrastructure without clear returns, governance, and risk-sharing frameworks.
Any transition away from the travel tax must therefore be accompanied by a replacement mechanism that is stable, predictable, and sufficient to sustain infrastructure development.
Regaining momentum
Tourism is regaining momentum. Beyond visitor numbers, it remains one of the country’s most effective economic multipliers—driving regional development, activating land values, attracting investment, and generating employment in areas with limited alternative growth engines.
But this growth depends on the fundamentals: Destinations must be accessible, functional, and capable of supporting both visitor demand and investor confidence.
Policy decisions affecting tourism funding should be anchored in long-term strategy rather than short-term sentiment. The communities whose livelihoods depend on tourism deserve solutions that are sustainable, structured, and aligned with national competitiveness.
If the Philippines aims to build a tourism industry that supports inclusive regional growth, attracts long-term investment, and generates sustainable jobs, it must protect—and strengthen—the foundations that make that growth possible.
Reform is welcome. But dismantling the system without a credible replacement risks undermining one of the country’s most promising economic sectors.
The author is the director of Hotels, Tourism, and Leisure at Leechiu Property Consultants
