United nations of tax incentives

Appendix D
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Estimating the benefit of TIPT: technical procedures
This appendix documents the technical procedures used to estimate 
the benefit of TIPT as measured by the economic and revenue 
impact of TIPT.
The economic impact is broken down into three components 
in their sequential order: capital investment, direct GDP impact and 
total GDP impact. We also estimate the revenue gain directly linked to 
the total GDP impact. On the other hand, we ignore the employment 
impact since it is not specifically targeted by TIPT.
The three data sources used for our estimation are: DR’s 
tourism firm dataset for 2007–2015 (hereafter “firm data”), WTTC’s 
time series for DR “Travel and Tourism investment” for 2001–2015 
(“WTTC data”), and DR’s 2012 input-output account, “use and 
supply table” (“IO table”). Note that DR’s firm dataset covers only the 
conventional tourism industry targeted by TIPT: hotels, restaurants 
and tourism-oriented housing projects. In comparison, WTTC’s 
time series covers both the conventional tourism industry and the 
transportation elements (e.g., airliners and the car-rental sector) 
that facilitate “travel”. We need to pay attention to such data gaps to 
preserve analytical consistency.
Note that, because the TIPT was introduced in October 2001, 
we assume the usual time lag in implementation of any legislation and 
ignore the “instant” impact of TIPT in 2001.
Step 1: Estimate the range of annual tourism 
investment attributable to TIPT (table 3)
1.1 In “IO table”, estimate the relative shares of transportation 
(“transport and storage”) and tourism (“accommodation 
and food and beverage services”) in their aggregated capital 
*
Prepared by Duanjie Chen, Research Fellow, School of Public Policy, Univer-
sity of Calgary.

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Appendices
investment, which are assumed to be the same as those of their 
aggregated “consumption of fixed capital”; the result is 12:88, 
or 12 per cent for transportation. [Note: this estimate needs 
to be fixed by following the methodology paper by WTTC/
Oxford Economics (2016), pages 26–27, when the relevant data 
become available.]
1.2 Apply the relative share of transportation (12 per cent) to the 
WTTC time series for “Travel and tourism investment” to 
single out the time series for “tourism investment”, which 
includes investments made by both the business sector and 
the government.
1.3 Subtracting the government investment in tourism from the 
result of Step 1.2 to arrive at the tourism investment made by 
the business sector only, which is consistent with the firm data 
by definition.
1.4 Based on the “firm data”, estimate the range of tourism invest-
ment that is truly 
attributable
to TIPT; the range is from 12 
to 29 per cent, by taking the share 
associated
with TIPT firms 
in total investment made in 2011 (12 per cent) as the “mini-
mum” and that in the total assets up to 2007 (29 per cent) as 
the “maximum”.
1.5 Apply the TIPT range (Step 1.4) to the tourism investment by 
business sector (Step 1.3) to arrive at