Wednesday, June 05, 2013

The Power Game: Balearics' green taxes

The Balearic Government's abandonment of its so-called green taxes can be styled in different ways. It can be seen as pragmatic or as an embarrassing climbdown. In fact, it is both. There are different interpretations, but the reasons are the same: pressure from business and a fear of the loss of political support. There are no other reasons except perhaps the righting of the wrong of the insult to the public's intelligence that these taxes represented.

When the taxes were announced, they were spun as being ones that were good for the environment. No one believed this for one moment. How could anyone have been expected to believe this when this same government was giving the green (sic) light to projects such as the Es Trenc development, the Sencelles golf course and the import of waste for incineration at Son Reus? The government was desperate to find any sources of new tax revenue and so it picked car hire, food and drink packaging and retail centres out of a hat and slapped taxes on them that were green in name in the hope that the public would buy green credentials that the government simply could not boast. The government must have thought that that the public was decidedly green in a different sense of the adjective, if it believed that the public was going to buy spin of the worst sort. It, the spin, was ironically transparent; ironic, because government in Mallorca never is transparent.

Some of the justification for the taxes bordered on the ridiculous. Retail centres, because they attract vast numbers of cars, were deemed polluters because of the concentration of these vehicles. And yet, other centres, entertainment ones for example, were not deemed polluters. Nor were large hotel complexes. Or whole large industrial estates. Or large car parks. Or roads. And once the objections to the taxes started raining over the government, they brought their own pollutants, ones that sought modifications. Hence, milk was made exempt from the packaging tax. But why wasn't water?

Though the taxes were all, in their different ways, consumer taxes, it was business that lined up against the government, not the ordinary man, woman or tourist in the street. It was the retailers in particular who made the government climb down. These have represented one of the few sectors of the local economy to have experienced growth over the recent years of crisis. They have done so thanks to other governmental green lighting - the go-ahead for ever more retail centres. What on earth was the government thinking? It gives permission for building and for job creation, and then it wants to go and tax the retailers. Economic, environmental and policy incoherence. Quite some achievement.

One mentions policy, but the government has no other economic policy goal than to reduce the islands' deficit. There were always likely to be some tax shocks that were going to be pulled out of the magician's hat, but the green taxes were examples of policy being made firmly on the hoof. They were never part of the Partido Popular manifesto, but had they been, the PP might have found it difficult to have won the last election. Business would have seen to that.

The climbdown merely demonstrates how weak this government is. It holds an overall majority but its opposition is not PSOE, it is not Més, it is not El Pi. It is business, and business is one hell of a lot stronger than any political party in Mallorca. The hoteliers have long been proof of this, and now the combined might of Eroski, Mercadona, El Corte Inglés and others has demonstrated its power. The PP would naturally have allies among the businesses of the Balearics, but alliances can be easily shattered along with hopes of re-election.

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.

The government still needs to find other ways to improve the islands' finances. I have argued that it should have re-visited the idea of a tourist tax (working well enough, it would seem, in Catalonia), but it won't and can't. It was a PP government which scrapped the previous tax and it was business, the hoteliers, who made damn sure it did. Who holds the power in the Balearics? It isn't the government.

Any comments to please.

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