Tuesday, February 09, 2016

Why Not The Green Taxes Instead?

In the scheme of things, the revenue to be derived from the sustainable tourism tax would represent a modest, albeit welcome boost to regional finances. It has to be seen for what it is: a regional tax for which the regional government has every right to charge.

The rights to tax-raising ceded to regional governments mean that, for instance, the tax revenue for property sales goes directly to Palma and isn't included in Madrid's calculations for regional financing that are linked to national tax raising, e.g. IVA. Property transfer tax is one of the most significant of these regional taxes, and in 2015 the revenue from it increased by almost 100 million euros, a figure which is likely to show a further rise in 2016. To place the sustainable tourism tax in context, the upper estimate of revenue from this would equate to 12% of property transfer tax revenue. It isn't small beer but it also isn't the whole brewery. The amount would be roughly the same as the revenue from inheritance tax and also from the water tax, one that the previous government of José Ramón Bauzá amplified as part of a package of "green" taxes and ended up being the only one to actually have been applied. 

Those green taxes were to have included ones for large retailers (because of the pollution caused by cars being driven to and parked by large retail outlets), for non-returnable plastic bottles and for car hire. The latter of these, when its introduction was being discussed, was referred to as a tourist tax. It was to have been a charge made because of emissions from vehicles and was due to have raised 15 million euros per annum. In the end, it was not introduced. The fuss caused was not a wide one. The public, tourists would have barely noticed the fuss. It was one made mainly by businesses affected - the retailers and the car-hire agencies. Under the threat of legal action and faced by the combined might of the major companies, Bauzá buckled.

The various taxes as a package would, had they been introduced, have raised an annual revenue of roughly 70 million euros, a figure not so different to the estimate for the sustainable tourism tax. Had they been established within the framework of regional tax legislation, it is most unlikely that the current government would now be seeking to repeal them. It has been repealing a great deal of the Bauzá legacy, but green taxes would hold appeal and one that would not be for a repeal.

The point with the green taxes was that they were not political taxes. They were ones dreamt up to address the parlous funding shortfall that the Bauzá regime faced. That it failed utterly in addressing this by rolling over and being tickled by Madrid into not demanding funding that was due to the Balearics should not disguise the reasons for the green taxes. But they were contrary to PP philosophy. They were deemed necessary (until they were later deemed unnecessary).

The sustainable tourism tax is a wholly different beast. It is a political tax, and to appreciate the extent to which it is, one only has to be aware of the rows now emanating from parliament regarding the application of revenue. It is a tax which, had PSOE been governing alone, would almost certainly not have been revisited. It has been because other parties demanded that it should be.

While it is argued that it is a tax for specific purposes, such an argument is disingenuous. Individual taxes cannot be divorced from the overall funding pot, and indeed the tax hasn't been insofar as it has been linked to funding shortfall. Yet we now have a situation in which the government discovers that overall tax receipts shot up last year and will continue to rise. Allied to this are the investment payments of 80 million per year for three years that Madrid had previously withheld. An alteration to Balearic status under the special regime provisions should release yet more funding.

The political nature of the tax has been exposed by the fighting over its application which, if Podemos gets it way, would mean Mallorca being discriminated against, hotel workers having to pay the tax to stay in hotel accommodation and there being no reduction of the tax in winter. PSOE in particular are livid with all this. They'll say there'll be dialogue, but there are a great deal of politics at stake. If there were really still a case for the need for additional funding, then why not revisit the Bauzá taxes? The amount would be similar, but then the politics would be different. For Podemos, large retailers and car-hire agencies seem not to be the great enemies that the hoteliers are or, as it seems more and more intent in demonstrating, that tourists themselves are.

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