Eco-Tax Crash: Myth or not myth?

As you might expect her to, the national secretary-of-state for tourism, Isabel Borrego, isn't a fan of tourist eco-taxes wherever they might be applied. She is of course affiliated to the Partido Popular - it is widely said she got the job because she was chummy with the ex-president of the Council of Mallorca, Maria Salom - and so she would be bound to oppose tourist taxes. Being Mallorcan, she has a particular interest in the plan for a Balearic tax, and she has been voicing her displeasure.

Borrego says that there are "objective data" which show that the new tax would create a loss in tourist numbers. These data relate to the previous tax. It, she says, led to there being one million fewer tourists in the Balearics during 2002-2003. Her objective data are open to question.

What losses did the Balearics incur because of the previous tax? Any? It is true to say, because the Balearic tourism ministry keep very complete records of these things, that there was a fall in tourism numbers in the first year that the tax was applied (it came into effect in May 2002). This decline, though sharp, was not as great as Borrego says: it was just over 550,000 for the whole of 2002. Nevertheless, and QED, the eco-tax meant more than half a million fewer tourists. Well, not necessarily.

Borrego has been speaking about the tax and how it is or will be perceived by the German market. The 2015/2016 version of this market will see itself as being under attack by the tax, one which implies a rejection of the visitor. In this, she is echoing the narrative from a separate issue that arose around the time of the old eco-tax. It was one to do with remarks from the then tourism minister, Celesti Alomar, and president of the Council of Mallorca, Maria Antonia Munar. They gave an implication that German tourism of the 2002 variety was not wanted: or at least a certain type of tourism was not wanted. This had little or nothing to do with the eco-tax. It had everything to do with wanting a whole new "quality tourism". It was picked up in Germany in particular, though it was a theme that applied to tourism from all markets: just as the eco-tax did.

The German market did require some later PR massaging in order for it to be satisfied that Alomar and Munar had not been waging some sort of campaign against it. But the fall in tourism (and in German tourism in particular) which occurred needs to be seen against this background, as it also needs to be considered in terms of economic conditions.

While tourism in the Balearics in 2002 fell by 7.6%, the German market showed one of the heaviest falls: down 16%. Indeed, most markets were down that year. The British registered a small 1.2% drop. So, was this the result of the eco-tax?

The German economy went into recession at the end of 2001. Slight growth returned six months later, but weak economic performance was still evident enough by the start of 2003 for "The Economist" to feature an article entitled "Germany's Not Working" on 6 January. There were recessionary influences across Europe in 2002. The UK was an exception. Meanwhile, in Spain as a whole German tourism fell in 2002 by over 6%

The point is that the German market, which had roughly the same one-third share of all Balearic tourism as the UK market in 2001, was by far and away the most important reason why there was a fall in tourism in 2002. The 16% represented over 500,000 tourists. Therefore, was it just the eco-tax which contributed to the decline or did recession and those negative comments from politicians have as much impact if not more?

Moving on to 2003, though Germany was still stumbling economically, the German tourism market revived. As so often is the case (or certainly was before the prolonged "crisis"), confidence picked up relatively quickly. In 2003, and the eco-tax was still applicable until October, tourism in the Balearics grew by 6.6%. The German market was up by over 4%, the British by almost 7%. The losses of 2002 were all but regained.

These "objective data" suggest that in the second year of the eco-tax (2003), tourists - especially German tourists - had either accepted the reality of the tax or had shaken off anxieties caused by recession (a further anxiety, 9/11, has been widely accepted to have not been much of a factor in 2002). The growth in 2003 pushed total tourists numbers above those of 2001, when - and this is usually forgotten - there had also been a fall in tourism: before the eco-tax came in.

This isn't to let the eco-tax off completely. In 2002, for the five main sun and beach regions of Spain, the Balearics was the only one apart from the Canaries to experience a fall in tourism, and this fall - 7.6% - was much higher than the Canaries' 1.8%. Catalonia, meanwhile, had romped along with 15.2% growth.

Was the 2002 crash due to the eco-tax or is it a myth? Not totally. It did play a part, but how great a part is impossible to evaluate. One thing's for sure, it wasn't one million.