Thursday, September 19, 2013

The Green, Green Tax Of Home (And Only Home)

"It would be amazing were these green taxes to come before parliament again and be ratified. The government says that they will be debated once more in September with an intention to introduce them at the end of the tourism season. But what would have changed to make business more inclined to stomach them? The next election would in fact be that much closer; this is about all that might have changed."

I wrote the above in early June this year. The Balearic Government had announced then that taxes on car hire, on food and drink packaging and on large retail centres - the green taxes - were not going to be introduced as the government had intended. President Bauzá has now said that, despite a promise to bring the taxes back for debate in parliament, there will be no taxes. Not for one moment did I ever imagine that there would have been such a debate or that the taxes would have been introduced.

Bauzá has avoided taking the issue before parliament at all. His announcement came at a briefing for business leaders. There may have been little point in having a parliamentary discussion, but he might at least have afforded the parliament a touch of courtesy and made the announcement to it rather than to a private gathering.

But of course the people he was addressing would have included just those people who objected to the taxes - business leaders. It was they who put the kibosh on the taxes. When the mighty retailers gathered and threatened legal action against the taxes, the government's game was up. A president who knows which side his bread is buttered doesn't bother with announcements to parliament but to those who are the real powers in the land, of which he isn't one.

The spin behind the announcement, though, tells a rather different story. The taxes are not being reconsidered because the economy is improving; hence there is no need for new sources of tax revenue. The deficit requirement placed on the regional government by Madrid has given the Balearics a bit of wriggle room as well and given the government a further reason not to bring in the taxes.

Maybe we should just consider, however, what this economic improvement entails. Growth of 0.3% in the second quarter, excellent hotel occupancy rates and increased tourist spend. I think I have dealt with the latter two of these in a previous article. As for second-quarter growth, it is positive, but let us wait until the winter quarters and see if there is genuine and consistent growth and not just that brought about by seasonal factors.

We should also consider the original motives for the green taxes. One was to raise revenue, the other was to act as "an incentive for greater environmental responsibility". The finance minister and vice-president at the time, Josep Aguiló, conceded that these taxes went counter to the "ideology of the Partido Popular" (a point which has now been reiterated by the party's spokesperson Mabel Cabrer), but one has to ask, therefore, why they were ever conceived. The government's sudden discovery of a previously absent greenness was fiscal imperative wrapped in environmental foliage.

It might be recalled that there was one other green tax. It is the one that has been introduced. It has resulted, in some instances, in householders' water bills doubling. If this ran counter to PP philosophy, then will it now be scrapped? One very much doubts it.

The green taxes were announced right at the end of last year's tourism season. So, despite the revenues from tourism (being repeated this year), the government still felt compelled to invent some new taxes. Oddly though, at the start of this year the government was able to announce that its tax revenues for 2012 had risen unexpectedly. Regardless of this, and running counter to the party's ideology, the green taxes were still to be introduced.

The fact is that they would have been had it not been for pressure from big business, the typical supporters of the PP. They would have been up for introduction now were it not for the same pressure, while there is one other good reason why the government does not intend to consider the taxes again. The government doesn't want to be fighting on too many fronts. It has a fight with the teachers, one it will believe it can handle and depict as leftist, Catalanist agitation. It doesn't want one with an opponent it cannot handle. That which helps put it into government. Big business.

Any comments to please.

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