Tropical Hainan Province has been given the chance to shine as China expands its tax refund program in the southern island to cover domestic tourists.

The new policy, effective May 1 this year, sets the rebate cap on purchases of no more than 5,000 yuan ($762) per person per trip and applies to domestic and overseas tourists 18 years and older who will fly to other destinations in China from the island. It covers 18 categories including jewelry, artwork, wristwatches and cosmetics.

Each eligible tourist can claim rebates twice a year, while island residents can claim rebates once a year. The refunded taxes include customs duties, importation value added taxes and excise taxes.

The program is part of the country's vigorous efforts to turn Hainan, once an agricultural backwater, into an international tourist destination.

The tax incentive is expected to add to the island's attractiveness, said Wang Keqiang, Deputy Director of the Hainan Provincial Department of Commerce.

The island hosted nearly 26 million tourists in 2010, 97 percent from the mainland. "Domestic travelers have great purchasing power, and Hainan will likely benefit from this," he said. "But we still have a lot to do to improve our infrastructure and shopping services."

Xia Feng, a research fellow with the Haikou-based China Institute for Reform and Development, said Hainan must make further progress if it's going to compete with destinations like Hong Kong, and the two sides will strengthen cooperation to propel common prosperity.