Optimality of Casino Taxation – The Case of Portugal

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


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.


  1. Barro RJ (1974) Are government bonds net wealth? J Polit Econ 82(6):1095–1117CrossRefGoogle Scholar
  2. Chao C-C, Hazari BR, Sgro PM (2005) Tourism and economic development in a cash-in-advance economy. Res Int Bus Finance 19:365–373CrossRefGoogle Scholar
  3. Chao C-C, Hazari BR, Laffargue J-P, Sgro PM, Yu ESH (2006) Tourism, Dutch disease and welfare in an open dynamic economy. Jpn Econ Rev 57:501–515CrossRefGoogle Scholar
  4. Gómez CM, Lozano J, Rey-Maquieira J (2008) Environmental policy and long-term welfare in a tourism economy. Span Econ Rev 10(1):41–62CrossRefGoogle Scholar
  5. Hazari BR, Sgro PM (1995) Tourism and growth in a dynamic model of trade. J Int Trade Econ Dev 4:243–252CrossRefGoogle Scholar
  6. Hazari BR, Sgro PM (2004) Tourism, trade and national welfare. In: Contributions to economic analysis. Elsevier, AmsterdamGoogle Scholar
  7. Matias Á, Costa CMG, Gil-Alana L (2010) The economics of casino gambling: evidence for Portugal. J Tourism Dev 13:119–120Google Scholar
  8. Nowak J-J, Sali M, Cortés-Jiménez I (2007) Tourism, capital good imports and economic growth: theory and evidence for Spain. Tourism Econ 13(4):515–536CrossRefGoogle Scholar
  9. Rybczynski TM (1955) Factor endowment and relative commodity prices. Economica 22:336–341CrossRefGoogle Scholar
  10. Schubert SF, Brida JG (2008) Dynamic effects of subsidizing the tourism sector. Tourism Econ 14(1):57–80CrossRefGoogle Scholar
  11. Schubert SF, Brida JG (2009) Macroeconomic effects of changes in tourism demand: a simple dynamic model. Tourism Econ 15(3):591–613CrossRefGoogle Scholar
  12. Turnovsky SJ (1997) International macroeconomic dynamics. MIT, Cambridge, MAGoogle Scholar

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

Personalised recommendations