An Empirical Investigation Between Tourism and Government Revenue in Bangladesh

Tourism is considered one of the fastest rising industries in the world. The most significant economic feature of the tourism industry is that it contributes to five high priority socio-economic goals of the developing and emerging countries: the generation of income, jobs creation, foreign exchange earnings, improvement of the living standards, and poverty reduction (Amin, 2010). One of the possible channels through which tourism can affect these goals is the government revenue. Tourism activities can increase government revenue through taxes as different types of taxes are imposed on tourism goods. Tourism development and the subsequent revenues earned by the host government can result in a more productive workforce, increase the living standards and lead to economic development. In Bangladesh, tourism can play an essential role as promising alternative government revenues and for maintaining a healthy fiscal balance. To our knowledge, there is no study addressing the empirical relation between tourism receipts and government revenue in the context of Bangladesh economy. Thus, we investigate the co-integration relationship between tourism and government revenue in Bangladesh using annual time series data for the period 1972 to 2016 in a bivariate framework. The Autoregressive Distributed Lag (ARDL) bound test reveals a long-run equilibrium relationship between the concerned variables. Granger causality test further show a unidirectional causal relationship running from tourism receipts to government revenue in Bangladesh. Given our results, it is recommended that Bangladesh should, give priority to developing the tourism industry to attain economic security in the future.