Tourist Tax: Support ebbs away

There's been some talk about a tax. You might just have noticed. If only the government could pretend it was all a ploy to divert attention from other matters. It can't because the tax goes to heart of the government - its differences and divisions, its need for increased revenues, its ideologies.

The government can now count on an ever-diminishing number of allies for the tourist tax. Jumping ship, for example, is the Balearic general public, scandalised at the prospect that it will be considered to be among the tourist classes and be forced to pay what will, in effect, be a hotel tax for residents. One of the government's dwindling band of allies is ARCA, the association for the preservation of historic centres. It has voiced its support this week and added that it would like the tax to be spent on preserving buildings and other structures of a heritage nature. There's something else for Biel Barceló to spend the tax on.

Everyone's now wading into the argument. The British press are at it, and amusingly one Spanish report (which should have known better as it came from a normally intelligent source) said that the left-wing press was taking issue. "The Mail"? Since when has "The Mail" been left-wing? ABTA are now at it as well, while the ranks of Spanish politicians and their confidants who are against the tax have been swelled by Mariano Rajoy's chief economics advisor. He's against it, as you would expect him to be.

It was, in a way, a bit rich for a Rajoy advisor to take issue with a tax on the grounds that it will lead to a loss of competitiveness. What about when the PP raised IVA (VAT) on all manner of tourist-related services? What about when the PP didn't stick to their promise to cut the tourist rate of IVA? Were these going to lead to a loss of tourism competitiveness?

As things have turned out, they haven't, and the experience of the IVA rise, which in some instances was to the tune of 13%, tells its own story, as do the price rises by hotels this year and, more so, next year. And as also does the tax on petrol to help fund the Balearic health service. IVA - Value Added Tax - is a terribly dull subject and its payment is, for the most part, not obvious, even if it has meant a price increase. Hotel prices? Well, these are passed on by the tour operators and included in, for example, the price of a package. The price of the package might go up, but is there a big song and dance? The tax on petrol? Not all tourists hire cars, but those who do and have been doing so for the past few years might not be aware that they have been assisting in paying for the health service when filling up at the petrol station.

There is, of course, a fair question to be asked about that petrol tax. Has it gone to the health service? Who can say. But whether it has or it hasn't, its introduction was by and large ignored by the travel industry and the travel media. IVA, hotel prices, petrol, none of them catch the imagination and cause a frothing at the mouth in the same way as a naked and visible tourist tax does.

The government has been coming out with some pretty strange stuff about the tax, which only goes to reinforce the feeling that the tax simply hasn't been thought through. We have President Armengol banging on, as she constantly does on everything, about there being "dialogue" and there not being "imposition". When so many beg to differ with the government over the tax, imposition seems to be exactly what it is. The president then appeared to imply that the 13.5 million tourists who come to the Balearics will be paying the tax out of the generosity of their hearts. Yes, she used the word "generous" and another which can be interpreted as supportive or even charitable.

To cap it all though, and with the British (and German) media poised to thrust the dagger ever deeper, we have government spokesperson and minister for the presidency, Marc Pons, approaching Inma Benito of the hoteliers' federation to ask her and the hoteliers to form a "common front" so that the foreign tourist markets will understand the necessity for the tax and ensure that it doesn't damage the image of the Balearics as a tourist destination. Well, nothing like trying to get your greatest enemy onside, I suppose, but when Benito is constantly reminding the government of the damage that will be caused, how is she supposed to come over as a credible witness for the government's defence? Pons' approach felt like desperation, as was his insistence that the "citizenship" was in agreement with the tax because of the need for additional financing for the Balearics. The citizenship might well have been, before, that is, it discovered that it would be contributing to this additional financing.

To be fair, both camps can choose their words and examples selectively. The anti-camp, as ABTA have shown, can invoke the damage that the old eco-tax caused and the significant fall in tourism that resulted. The main problem with this is that the fall was nothing like legend has it. As I pointed out in an article a couple of months ago ("Eco-Tax Crash: Myth or not myth"), there was a fall in 2002 of 550,000 tourists, a drop of 7.6%, but this was overwhelmingly because the German market slumped by 16%: the UK's went down by 1.2%. The fact was that the German economy had gone into a short recession, and in 2003, the second year of the eco-tax (it wasn't scrapped until the autumn), tourism grew by almost seven per cent, with the German market up by over 4% and the UK's by 7%. In addition, what is always overlooked is that in 2001, the year before the eco-tax came in, there had also been a drop in tourism numbers.

Even allowing for the fact that the decline was not as disastrous as some would suggest, using the experience of the previous tax helps only so much. There is one very big difference to how things were in 2002, and that is the existence of social media. While the established media (British and German) savaged the tax then and will do so once again, it is social media through which the damage could really be done, and the government is revealing itself to be unprepared to the point of ineptitude for the negative publicity assault. Pons making his approach to the hoteliers is, I would suggest, evidence of this.