Just Another Tax?: Balearic finances

The government has released its projections for revenue generation in 2016. And by revenue generation one means tax. Buried among the various contributions is what is referred to as "other taxes". This shows a 50 million euro increase over 2015. It is the provision, so it is believed, for the tourist tax, a rather more modest number than the 100 million or more that has been spoken of but which would be attainable only with what would prove to be an onerous levy. 

It's difficult to judge how accurate the provision is without knowing what exemptions there might be (children) or what the cap will be on the number of overnight stays (of which it has been suggested they may be only five). It's also difficult because of the number of visitors who won't pay it because there will be no mechanism to do so through accommodation. This is why the government is so keen to have collection at ports and airports, a scheme which, however, could prove as unworkable as it would be damaging (even more damaging) in PR terms. That Madrid appears disinclined to meet the regional transport minister to discuss the subject is to Madrid's credit.

The inclusion of the provision for the tourist tax in the revenue forecast is fair enough, but the very fact of its inclusion lends weight to the argument that the tax will merely be a further means of boosting general revenues, i.e. it will be treated as a general tax. As the government continues to faff around and change its mind on an almost daily basis as to what its purpose is, this impression strengthens. But above all, there is the whole question of government finance. It bangs on constantly about the 0.3% deficit ceiling for 2016, one on which Madrid will not budge, making it ever clearer that the tourist tax is a device for addressing spending capacity that will be denied to the government because of the ceiling.

The government does, though, have to consider its spending as a consequence of its own specific tax-raising. The greater its capacity, the more Madrid might be inclined to penalise the government when it comes to the funding allocation derived from the system that the government considers so unfair: the redistribution of tax revenues to richer and poorer regions of Spain. It is an unfair system in that the Balearics have constantly been left well short because of the high levels of income tax and IVA (VAT) returns compared with other regions. But the more revenue that the government derives from its own specific regional taxes, the more the liquidity funds and what have you that Madrid controls will be biased towards the farmers of Extremadura. It is a bit of a Catch 22 in this regard, but that is how the system, flawed as it is, works.

The expectation is that this will all change if the national government changes and PSOE's Pedro Sánchez becomes prime minister. It may well change, but change is already afoot, the Rajoy administration having conceded that the financing system needs to be amended and to be made more favourable to the Balearics. For all that Rajoy has applied austerity, the point needs to be made that Madrid has brought about some discipline with regions' finances, though even it has been unable to effect major improvements to debt levels: the regional government, left a legacy of enormous debt by the Bauzá regime, wants to negotiate with the banks.

Even once the government does finally define the tourist tax - the amount, the length of stay, the exemptions, the means of collection, the use (or uses) - the arguments will continue, and the Balearic tax will attach far greater controversy than similar taxes elsewhere, some of which are little known about. A correspondent of mine mentioned a conversation he had with a tourist who has come to Mallorca twice this year rather than dividing his two annual holidays between Mallorca and Tunisia (for obvious reasons). This tourist says that he won't be returning to Mallorca if there is a tax, but then Tunisia has one of its own - a departure tax.

The point is, though, that regardless of taxes in what are direct competitor destinations - Morocco, Tunisia, Croatia, Bulgaria, Catalonia, parts of France and even perhaps Dubai - the Mallorcan visitor appears unmoved by the argument and the comparison. 

The same tourist of my correspondent's acquaintance says why don't they just hide the tax and apply it some other way and not make an issue of it. Possibly they could, but I've other suggestions. Why not make it a tourist lottery? Or make it voluntary? As President Armengol believes that tourists are willing to be so generous with the tax, who knows, the government might rake in even more from a massive Balearic tipping scheme. Couldn't be done though, as the tax budget wouldn't allow it.