The Return Of The Eco-Tax?

PSOE, aka PSIB in the Balearics, certainly knows what the big issues in tourism are. When the national tenancy act was reformed last year, there was PSOE siding with the supporters of private apartments for holiday let. This was a case of politicking by a party which had done nothing to alter legislation in the Balearics whilst it had been in power.

Yet more politicking has been in evidence in Calvia. PSOE's call for all-inclusive regulation is an act of self-interested irrelevance, as there isn't a cat in hell's chance of there ever being anything which equates to a ban anywhere in the Balearics. Talk of a ban is a nonsense because of European law.

And now, there is more politicking. The third big issue that PSOE is raising is one which, were it to win the next election, it could do something about. The eco-tax has returned, and the hoteliers will already be sharpening their knives. PSOE's proposal to the Balearic parliament for the eco-tax to be reintroduced is destined to fail while the Partido Popular remains in government, but having brought it before parliament while in opposition, might it do so in government? A coalition that places the Més leftist grouping in alliance with PSOE (and others) could well bring the tax back.

The PP government has consistently said that it has no intention of reviving the eco-tax. It made its views perfectly clear to the APTUR holiday-lets association when it proposed the tax and the revenue benefits it would realise, were there to be permissive regulation of private holiday apartments.

Why is PSOE once more raising the spectre of the eco-tax? Its deputy, Antoni Diéguez, who is the one who has brought the matter up, says, among other things, that it would help to reactivate the economy by facilitating public investment. Really?

It should be recalled that the eco-tax was introduced by the first Antich PSOE-led administration. It was a botched job, poorly implemented and poorly explained. What revenue it raised contributed little. A good chunk of it went on acquiring the Son Real finca, an investment that was perhaps justifiable given the finca's heritage, but one that was never destined to mean anything in terms of economic return or benefit.

PSOE will be able to point to the example of Catalonia in arguing that a tourist tax (which is what the eco-tax is) does not harm tourism and does raise revenue. It is true to say that since the tourist tax was implemented, Catalonia's tourism appears not to have been harmed. It also true to say that the Catalonian government has a very healthy tourism promotion budget, thanks to the tax. It is in excess of 30 million euros, more than ten times the size of the Balearics tourism promotion budget.

But the Catalans were clear from the outset that the tax would be earmarked for promotion. They are, in effect, getting tourists to pay for trying to attract more tourists. While Catalonian tourism has not been harmed by the tax, the moral basis for it is dubious.

An eco-tax, on the other hand, does have a moral basis. Tax revenues are of course raised through tourism activities, and these revenues contribute to provision of services and resources. But tourism does not pay directly for these services or resources. Moreover, the system of financing for the Balearics means that the islands make a net loss on tax revenues that are raised, and a pretty hefty loss at that: Madrid returns way less than it receives from the Balearics.

As a consequence, there is a fiscal gap in the Balearics, but seeing the issue purely in fiscal terms neglects the costs, in all manner of ways, that are associated with tourism. It, tourism, uses the same water, same electricity, same roads, same sewage, same health service, same police as everyone else. Yet it is transient and it doesn't pay directly. Indeed, what it pays is declining, the result of all-inclusives. A growing amount of tourism leeches off land, resources and utilities and gives precious little back.

Opponents of the eco-tax will point to the "crisis" that affected Balearics tourism between 2001 and 2003. There was a slump, but the eco-tax was by no means the only cause. Indeed, it has been argued that in itself it didn't have any discernible impact. The German economy at the time, 9/11, the euro, PSOE's attitudes when in government have all been cited as other factors. But the tax was badly implemented.

PSOE would know that the current government would reject its proposal, but it is a proposal which may have more of an eye on the future than on the present. If it does, then PSOE is heading for a battle royal with the unofficial government - the hoteliers.