Tax Discrimination And The Tourist

The national tourism minister doesn't think much to the imposition of a so-called green tax on car hire in the Balearics. Agencies in the car-hire sector don't think much to the tax either. It is likely to increase the cost of hiring a car by between two and four euros per day.

This is the third tax increase to hit car rentals in only a few months. The first was the introduction of the tax on a litre of petrol or diesel to help pay for the health service, the second was the increase in IVA. The first tax was aimed directly at the consumer, the other two aren't necessarily direct; car-hire agencies can either assume the tax burden or pass it on.

Why is the regional government imposing yet another tax on one part of the tourism industry? An answer is that the Balearic Government is making things up as it goes along. There was never any mention of this green tax - or others - prior to the last elections. It is casting around and trying to find anything it can lay its hands on in order to raise revenue and cut the deficit. It is scatter-gun economics: incoherent and improvised. For the record, these green taxes will also apply to drinking water, non-returnable plastic bottles and large retail centres.

A second answer lies with the fact that the regional government is too beholden to a sector of the tourism industry to do what it arguably should be doing: introducing a tourist tax. It won't or is unlikely to because the hoteliers would have a screaming fit.

The tourism minister, José Manuel Soria, doesn't think much to tourist taxes either. Specifically, he considers the one now introduced by Catalonia to be unnecessary, as he also considers the Balearics car-hire tax to be unnecessary. But Soria is caught between two stools: one of being a representative of a national government determined that regional authorities trim their deficits and determined to cut its cloth accordingly and so reduce budgets for all sorts of things, including tourism; the other of being the minister for the key tourism industry.

Soria is, therefore, out of step with Partido Popular colleagues in national government who might applaud tax-raising measures initiated by regional governments and with PP colleagues in the Balearics. He isn't out of step with the Catalonians because the PP is out of step with them in any event. And he is also stepping up against a big beast in the form of Joan Gaspart.

The former president of FC Barcelona and the current president of the HUSA hotel chain and of the tourism commission within the Spanish equivalent of the CBI has said that the tourist tax is necessary. In essence, Gaspart has said that Soria can't have things both ways: cut the total tourism budget by about a half and then criticise Catalonia (and the Balearics) for adopting measures that will raise revenue from tourism. Gaspart believes that other regional governments will follow Catalonia's lead and introduce a tourist tax.

It is significant that a hotelier should be as supportive of the tax as Gaspart is. It would be hard to imagine Balearics hoteliers being as amenable. The contrast underlines the extent to which the Balearics exist for the benefit of the hoteliers and Catalonia doesn't. Of course, not everyone in Catalonia is in favour of the tax, but in its comprehensiveness - as it will take in different accommodation, including, so it has been mooted, all types of private rentals - it is both bold and non-discriminatory.

It was the discriminatory nature of the old eco-tax in the Balearics that led to its being scrapped. The discrimination arose because it didn't apply across the accommodation board, which was why the hoteliers were so against it. But what will you now have in the Balearics if not discrimination? Not all tourists hire a car, but those who do will be liable for paying a tax. Furthermore, the tax on large retail stores - the justification for which being that they occupy that much land they should pay an environmental tax for the privilege - is also discriminatory. If retail centres, why not hotels? Do they not occupy considerable amounts of land?

Rather than be bold and introduce a tourist tax, the Balearic Government is adopting a piecemeal approach, grabbing bits of tax here and bits of tax there. The Catalonian tax might backfire, but then again it might not. If not, then Catalonia will be good for up to 100 million euros a year. Soria might note that this equates to a third of what he has lopped off the entire tourism budget.


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