Most of these alternatives have political and economic consequences which are unacceptable in most peace time free market economies. Borrowing from the private sector Direct competition with the private sector Most free market economies employ a mix of borrowing, direct competition and taxation to secure the resources needed to fund government operations. This question is often at the core of any political debate on taxation. To answer the question requires an understanding of the socio-political and economic dimensions of the item to be taxed. The industry and the travelling public are increasingly called upon to contribute more to the global tax base.
Taxes essentially shift the price curve upward resulting in a reduction of the quantity demanded.
These benefits include foreign exchange generation, job creation, economic multiplier effect, new business start up and service economy stimulus. Foreign Exchange Generation International travelers inject hard currency directly into the economy, boosting export income. Any tax-induced reduction in travel has the effect to reducing export income and direct monetary exchange. It is well known that small and medium-sized firms are one of the fastest growing and important sectors of the global economy. However, small firms thrive when regulatory and tax barriers are minimal, so even the smallest reduction in demand or the slightest increase in cost structure can drastically effect their profitability and longevity.