ARIMA-INTERVENTION MODEL: DEMAND OF TOURISM IN MALAYSIA

Malaysia is a paradise for tourists because of its natural and cultural advantages. The tourism sector plays an important role in Malaysia, not only generating national income but also influencing other economic indicators. Malaysia introduced the Goods and Services Tax (GST) on 1 April 2015 and the Tourism Tax (TTx) on 1 September 2017. This study aims to investigate the impact of the tax system, such as GST and TTx, on the demand for tourism in Malaysia. We used monthly tourist arrivals data as a proxy for the demand for tourism. Additionally, we adopted ARIMA-Intervention analysis to regress the monthly data from January 2014 to December 2018. The findings prove that GST has a significant negative impact on the demand for tourism at 5%, while TTx has a negative impact on the demand for tourism at 10%. This study provides valuable insight into the impact of tax system implementation on tourism demand. Thus, the government should revise the impact of tax policy on the tourism sector before implementation, particularly regarding the decision to resume GST or introduce any tourism-related tax. This action is vital to ensure that the growth of the tourism sector supports the sustainability of national economic growth.