The Law and Policy of VAT Tourist Tax Refund Schemes: A Comparative Analysis

Many forms of value added tax (VAT) or goods and services tax (GST) include a tax refund scheme for goods acquired by tourists when they visit a jurisdiction. These schemes have not been widely researched, and this article aims to fill this gap by providing a detailed discussion of the policy, legal design and administration of tourist tax refund schemes. The authors identify three main rationales for such schemes: (i) the destination principle, which is the jurisdictional basis for most VATs; (ii) the goal of providing an incentive to the tourism industry; and (iii) the principle of equity, or fairness. The authors then explore policy issues and risks for the design and operation of the main tourist tax refund schemes around the world. They analyse the main elements of the European Union (EU) VAT refund scheme, where the concept originated, and then do a detailed comparison of the design and administration of such schemes with different features GST in Australia and VAT in the People’s Republic of China (PRC). The analysis reveals that countries have quite varied design elements in their tourism refund schemes and face different operational challenges in their implementation. The authors identify ways to improve the design and administration of the schemes in Australia and China in light of the analysis in this article.