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Optimality of Casino Taxation – The Case of Portugal

  • Stefan F. Schubert
  • Álvaro Matias
  • Carlos M. G. Costa
Chapter

Abstract

In Portugal, casinos are taxed at a 50% rate, and the tax receipts are allocated to “Turismo de Portugal”, which can use it in several ways, including subsidizing tourism firms and advertising. A recent study showed that casino demand in Portugal is predominantly originated in the domestic market. Hence, there is a debate about if casinos should be taxed so heavily.

This paper aims at contributing to this debate. We develop a dynamic general equilibrium model of a small open economy, comprising an industrial sector, producing an internationally traded good, a tourism sector, producing tourism services, offered both to foreign tourists and residents, and a casino sector, supplying gambling services. Domestic residents derive utility from consuming the traded good, tourism services, and gambling. We analytically derive the effects of a reduction in casino taxation and demonstrate that this is welfare improving.

Keywords

Relative Price Small Open Economy Tourism Sector Industrial Good Casino Gambling 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

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Copyright information

© Springer-Verlag Berlin Heidelberg 2011

Authors and Affiliations

  • Stefan F. Schubert
    • 1
  • Álvaro Matias
    • 2
  • Carlos M. G. Costa
    • 3
  1. 1.Competence Centre in Tourism Management and Tourism Economics (TOMTE)Free University of Bozen-Bolzano, School of Economics and ManagementBolzanoItaly
  2. 2.School of Economics and BusinessUniversidade Lusíada de LisboaLisbonPortugal
  3. 3.Estoril-Sol, Casino LisboaLisbonPortugal

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