The draft for the law on the tax for touristic stays and sustainable tourism (the final version has yet to appear on the Official Bulletin) makes numerous references to items of legislation, both Balearic and national. One item it does not refer to is the revision of Article 78 of the 1992 law on the "impuesto sobre el valor añadido" - IVA. This revision was made in March 2012. At around the same time, the Catalonian parliament was approving the tax for touristic stays, which was introduced in November that year. The national government's amendment was well-timed, more than just coincidental. It established the basis for applying IVA (VAT) to a tourist tax, or rather THE tourist tax, as Catalonia was the only part of Spain that was proposing one; it is still the only part of Spain which has one, though the Balearics will shortly join it.
Had it been any region of Spain other than Catalonia that was bringing in a tourist tax, it is a moot point as to whether Article 78 would have been revised in the way that it was. But it was revised. A leading hotelier in Barcelona observed that it seemed somewhat illogical to have a tax on a tax, but Catalonia was obliged to comply with Article 78.
Biel Barceló, the tourism minister, says that it is illogical that a tax raised in the Balearics should be subject to a national tax. He may well think this, but he knew full well that there was such a national tax. The announcement of the application of IVA may have taken some by surprise, but it would have been no surprise to the government. It has known about it all along. Yet, when it came to the drafting of the legislation, there was no mention of IVA. It might strike some as strange that legislation of a tax nature should overlook a tax element.
It is only now, when the government is getting around to communicating information regarding the tax, that it has chosen to give the full story. It is disgraceful for it to only be doing so now. It is equally disgraceful for Barceló to keep referring to small amounts of money - a few cents in the case of the IVA element, he has said. The amounts may not be great, either the tax itself or the IVA add-on, but one person's small amount is another person's not so small amount. It's an insult. Barceló and others would do well to remember that the industry it so dearly wishes to now sustain was originally built with money from ordinary working people.
The IVA admission is, unfortunately, just another example of how poorly the tourist tax has been managed. As someone not opposed in principle to a tax, it has been the obfuscation, the vacillating as to its purpose, the simplistic references to "small amounts" and the interminable sustainable clap-trap that has led to a revision in attitude. And one can add, for good measure, the fact that the Balearic tax will represent a greater burden for the taxpaying tourist than Catalonia's does.
The hoteliers, meanwhile, see the same illogic as expressed by the Barcelona hotelier. What is the justification for applying IVA to the tourist tax? What service is subject to tax? The service of the regional government's unofficial tax collectors, i.e. the hoteliers and other accommodation providers? Only the national government can say, which is of course a convenient cop-out for the regional government. Don't blame us, blame Madrid. Maybe, but then Madrid didn't introduce a tourist tax. It just changed the IVA rules to ensure it got a bit more revenue for itself from an administration it wasn't friendly with (Catalonia) and will now get some more from an administration with which diplomatic, financial relations have all but broken down.
Showing posts with label IVA. Show all posts
Showing posts with label IVA. Show all posts
Saturday, April 09, 2016
Saturday, September 26, 2015
Tourist Tax: Support ebbs away
There's been some talk about a tax. You might just have noticed. If only the government could pretend it was all a ploy to divert attention from other matters. It can't because the tax goes to heart of the government - its differences and divisions, its need for increased revenues, its ideologies.
The government can now count on an ever-diminishing number of allies for the tourist tax. Jumping ship, for example, is the Balearic general public, scandalised at the prospect that it will be considered to be among the tourist classes and be forced to pay what will, in effect, be a hotel tax for residents. One of the government's dwindling band of allies is ARCA, the association for the preservation of historic centres. It has voiced its support this week and added that it would like the tax to be spent on preserving buildings and other structures of a heritage nature. There's something else for Biel Barceló to spend the tax on.
Everyone's now wading into the argument. The British press are at it, and amusingly one Spanish report (which should have known better as it came from a normally intelligent source) said that the left-wing press was taking issue. "The Mail"? Since when has "The Mail" been left-wing? ABTA are now at it as well, while the ranks of Spanish politicians and their confidants who are against the tax have been swelled by Mariano Rajoy's chief economics advisor. He's against it, as you would expect him to be.
It was, in a way, a bit rich for a Rajoy advisor to take issue with a tax on the grounds that it will lead to a loss of competitiveness. What about when the PP raised IVA (VAT) on all manner of tourist-related services? What about when the PP didn't stick to their promise to cut the tourist rate of IVA? Were these going to lead to a loss of tourism competitiveness?
As things have turned out, they haven't, and the experience of the IVA rise, which in some instances was to the tune of 13%, tells its own story, as do the price rises by hotels this year and, more so, next year. And as also does the tax on petrol to help fund the Balearic health service. IVA - Value Added Tax - is a terribly dull subject and its payment is, for the most part, not obvious, even if it has meant a price increase. Hotel prices? Well, these are passed on by the tour operators and included in, for example, the price of a package. The price of the package might go up, but is there a big song and dance? The tax on petrol? Not all tourists hire cars, but those who do and have been doing so for the past few years might not be aware that they have been assisting in paying for the health service when filling up at the petrol station.
There is, of course, a fair question to be asked about that petrol tax. Has it gone to the health service? Who can say. But whether it has or it hasn't, its introduction was by and large ignored by the travel industry and the travel media. IVA, hotel prices, petrol, none of them catch the imagination and cause a frothing at the mouth in the same way as a naked and visible tourist tax does.
The government has been coming out with some pretty strange stuff about the tax, which only goes to reinforce the feeling that the tax simply hasn't been thought through. We have President Armengol banging on, as she constantly does on everything, about there being "dialogue" and there not being "imposition". When so many beg to differ with the government over the tax, imposition seems to be exactly what it is. The president then appeared to imply that the 13.5 million tourists who come to the Balearics will be paying the tax out of the generosity of their hearts. Yes, she used the word "generous" and another which can be interpreted as supportive or even charitable.
To cap it all though, and with the British (and German) media poised to thrust the dagger ever deeper, we have government spokesperson and minister for the presidency, Marc Pons, approaching Inma Benito of the hoteliers' federation to ask her and the hoteliers to form a "common front" so that the foreign tourist markets will understand the necessity for the tax and ensure that it doesn't damage the image of the Balearics as a tourist destination. Well, nothing like trying to get your greatest enemy onside, I suppose, but when Benito is constantly reminding the government of the damage that will be caused, how is she supposed to come over as a credible witness for the government's defence? Pons' approach felt like desperation, as was his insistence that the "citizenship" was in agreement with the tax because of the need for additional financing for the Balearics. The citizenship might well have been, before, that is, it discovered that it would be contributing to this additional financing.
To be fair, both camps can choose their words and examples selectively. The anti-camp, as ABTA have shown, can invoke the damage that the old eco-tax caused and the significant fall in tourism that resulted. The main problem with this is that the fall was nothing like legend has it. As I pointed out in an article a couple of months ago ("Eco-Tax Crash: Myth or not myth"), there was a fall in 2002 of 550,000 tourists, a drop of 7.6%, but this was overwhelmingly because the German market slumped by 16%: the UK's went down by 1.2%. The fact was that the German economy had gone into a short recession, and in 2003, the second year of the eco-tax (it wasn't scrapped until the autumn), tourism grew by almost seven per cent, with the German market up by over 4% and the UK's by 7%. In addition, what is always overlooked is that in 2001, the year before the eco-tax came in, there had also been a drop in tourism numbers.
Even allowing for the fact that the decline was not as disastrous as some would suggest, using the experience of the previous tax helps only so much. There is one very big difference to how things were in 2002, and that is the existence of social media. While the established media (British and German) savaged the tax then and will do so once again, it is social media through which the damage could really be done, and the government is revealing itself to be unprepared to the point of ineptitude for the negative publicity assault. Pons making his approach to the hoteliers is, I would suggest, evidence of this.
The government can now count on an ever-diminishing number of allies for the tourist tax. Jumping ship, for example, is the Balearic general public, scandalised at the prospect that it will be considered to be among the tourist classes and be forced to pay what will, in effect, be a hotel tax for residents. One of the government's dwindling band of allies is ARCA, the association for the preservation of historic centres. It has voiced its support this week and added that it would like the tax to be spent on preserving buildings and other structures of a heritage nature. There's something else for Biel Barceló to spend the tax on.
Everyone's now wading into the argument. The British press are at it, and amusingly one Spanish report (which should have known better as it came from a normally intelligent source) said that the left-wing press was taking issue. "The Mail"? Since when has "The Mail" been left-wing? ABTA are now at it as well, while the ranks of Spanish politicians and their confidants who are against the tax have been swelled by Mariano Rajoy's chief economics advisor. He's against it, as you would expect him to be.
It was, in a way, a bit rich for a Rajoy advisor to take issue with a tax on the grounds that it will lead to a loss of competitiveness. What about when the PP raised IVA (VAT) on all manner of tourist-related services? What about when the PP didn't stick to their promise to cut the tourist rate of IVA? Were these going to lead to a loss of tourism competitiveness?
As things have turned out, they haven't, and the experience of the IVA rise, which in some instances was to the tune of 13%, tells its own story, as do the price rises by hotels this year and, more so, next year. And as also does the tax on petrol to help fund the Balearic health service. IVA - Value Added Tax - is a terribly dull subject and its payment is, for the most part, not obvious, even if it has meant a price increase. Hotel prices? Well, these are passed on by the tour operators and included in, for example, the price of a package. The price of the package might go up, but is there a big song and dance? The tax on petrol? Not all tourists hire cars, but those who do and have been doing so for the past few years might not be aware that they have been assisting in paying for the health service when filling up at the petrol station.
There is, of course, a fair question to be asked about that petrol tax. Has it gone to the health service? Who can say. But whether it has or it hasn't, its introduction was by and large ignored by the travel industry and the travel media. IVA, hotel prices, petrol, none of them catch the imagination and cause a frothing at the mouth in the same way as a naked and visible tourist tax does.
The government has been coming out with some pretty strange stuff about the tax, which only goes to reinforce the feeling that the tax simply hasn't been thought through. We have President Armengol banging on, as she constantly does on everything, about there being "dialogue" and there not being "imposition". When so many beg to differ with the government over the tax, imposition seems to be exactly what it is. The president then appeared to imply that the 13.5 million tourists who come to the Balearics will be paying the tax out of the generosity of their hearts. Yes, she used the word "generous" and another which can be interpreted as supportive or even charitable.
To cap it all though, and with the British (and German) media poised to thrust the dagger ever deeper, we have government spokesperson and minister for the presidency, Marc Pons, approaching Inma Benito of the hoteliers' federation to ask her and the hoteliers to form a "common front" so that the foreign tourist markets will understand the necessity for the tax and ensure that it doesn't damage the image of the Balearics as a tourist destination. Well, nothing like trying to get your greatest enemy onside, I suppose, but when Benito is constantly reminding the government of the damage that will be caused, how is she supposed to come over as a credible witness for the government's defence? Pons' approach felt like desperation, as was his insistence that the "citizenship" was in agreement with the tax because of the need for additional financing for the Balearics. The citizenship might well have been, before, that is, it discovered that it would be contributing to this additional financing.
To be fair, both camps can choose their words and examples selectively. The anti-camp, as ABTA have shown, can invoke the damage that the old eco-tax caused and the significant fall in tourism that resulted. The main problem with this is that the fall was nothing like legend has it. As I pointed out in an article a couple of months ago ("Eco-Tax Crash: Myth or not myth"), there was a fall in 2002 of 550,000 tourists, a drop of 7.6%, but this was overwhelmingly because the German market slumped by 16%: the UK's went down by 1.2%. The fact was that the German economy had gone into a short recession, and in 2003, the second year of the eco-tax (it wasn't scrapped until the autumn), tourism grew by almost seven per cent, with the German market up by over 4% and the UK's by 7%. In addition, what is always overlooked is that in 2001, the year before the eco-tax came in, there had also been a drop in tourism numbers.
Even allowing for the fact that the decline was not as disastrous as some would suggest, using the experience of the previous tax helps only so much. There is one very big difference to how things were in 2002, and that is the existence of social media. While the established media (British and German) savaged the tax then and will do so once again, it is social media through which the damage could really be done, and the government is revealing itself to be unprepared to the point of ineptitude for the negative publicity assault. Pons making his approach to the hoteliers is, I would suggest, evidence of this.
Tuesday, May 19, 2015
A Day Without Music
On the website - undiasinmusica.com - there is a thing to click on and play. So I did, and out of the speakers came the unmistakable orchestral introduction to The Verve's "Bitter Sweet Symphony". It wasn't the video, but had it been it would have shown Richard Ashcroft stomping along that street in Hackney with his determined and angry face, brushing everyone aside.
The choice seemed somewhat apt. For the music industry in Spain and Mallorca, these are times which are both bitter and sweet. Popular music has never been more popular, the opportunities to make it, thanks to technology, have never been so readily available, yet there are obstacles, and one of them is tax. This is why the musicians have their angry faces and are making gestures of placing their hands over their mouths. Tomorrow is "Un día sin música", a day without music. (Just out of curiosity, I'll check the website and see if there is anything to click on.)
The complaint that musicians and promoters have is against the 21% rate of IVA (VAT) that is applied to live performance. This is one of many areas of cultural activity which used to benefit from a reduced level of tax. When the Spanish Government, under firm instruction from Brussels, eyed up IVA as a means of making inroads into the national debt, it did so dramatically: live performance was one of various activities, not all of them cultural, which was clobbered by an IVA increase of 13%.
The anger that the IVA rises caused has been spread across all sorts of sectors. The tourist industry, which still has a reduced rate for many of its activities (hotels, restaurants, for example), had been under the impression that not only would it have escaped a rise in IVA but would have been granted a "super-reduced" rate. The Partido Popular had more or less promised this before the last election. Instead, the tourist rate went up from 8% to 10%, not down to the 4% super-reduced level. Though the hotel sector is generally supportive of the PP, it has felt let down and consistently refers to a broken promise and consistently demands that the super-reduced rate is applied. The Rajoy administration won't budge; it has ruled out any reduction.
The government has, pretty much since it introduced IVA increases in September 2012, dropped hints about possible reductions, but for the most part it has equivocated. One area of activity which has benefited has been the buying and selling of works of art: the rate was cut from 21% to 10%. As has been pointed out, however, the two principal "collectors" of art are banks and ... the government. To the disgust of many, the government has also been looking at giving preferential tax treatment to bullfighting (it also wants to make bullfighting something in the national interest and so protect it). As with other activities branded as "entertainment" by the finance ministry, IVA on bullfighting went up to 21% in 2012.
The day without music has been organised by nineteen associations which represent more than 800 businesses involved in Spain's music industry, and tomorrow a petition with over 500,000 signatures will be handed into Congress. The demand is for live music events to be treated in the same way as, for example, newspapers: to have a 4% super-reduced rate applied. Without such a reduction, it is claimed, there will be destruction or at least a less than bright future for live music performance. The slogan for the day is "reasonable and fair IVA for music", the organisers adding that the current rate is affecting international artists: they are holding fewer concerts in Spain or none at all on account of the increased cost of tickets.
One further cause of anger and annoyance is that clubs where live music is offered are obliged to charge the higher 21% rate of IVA on drinks than the 10% rate which applies to a bar where the entertainment might stretch to no more than a television being on in the corner. (I have to say that I wasn't aware that this was the case; I wonder how widely it is in fact applied.) But as the organisers of the day without music say, it is absurd to pay double (the IVA) for having a beer while listening to, say, a jazz group.
So, will there be any music tomorrow in Mallorca? Well, yes, of course there will be, but some of the major theatres will be quiet or not presenting live music. The Es Gremi centre in Palma, for example, has cancelled a Wednesday "night of legends" and will be showing a documentary instead. Trui won't he holding anything at its theatre and it has been prominent in lending its support to the campaign, as have some leading names in the Mallorcan music world, such as the rock singer Jaume Anglada.
The choice seemed somewhat apt. For the music industry in Spain and Mallorca, these are times which are both bitter and sweet. Popular music has never been more popular, the opportunities to make it, thanks to technology, have never been so readily available, yet there are obstacles, and one of them is tax. This is why the musicians have their angry faces and are making gestures of placing their hands over their mouths. Tomorrow is "Un día sin música", a day without music. (Just out of curiosity, I'll check the website and see if there is anything to click on.)
The complaint that musicians and promoters have is against the 21% rate of IVA (VAT) that is applied to live performance. This is one of many areas of cultural activity which used to benefit from a reduced level of tax. When the Spanish Government, under firm instruction from Brussels, eyed up IVA as a means of making inroads into the national debt, it did so dramatically: live performance was one of various activities, not all of them cultural, which was clobbered by an IVA increase of 13%.
The anger that the IVA rises caused has been spread across all sorts of sectors. The tourist industry, which still has a reduced rate for many of its activities (hotels, restaurants, for example), had been under the impression that not only would it have escaped a rise in IVA but would have been granted a "super-reduced" rate. The Partido Popular had more or less promised this before the last election. Instead, the tourist rate went up from 8% to 10%, not down to the 4% super-reduced level. Though the hotel sector is generally supportive of the PP, it has felt let down and consistently refers to a broken promise and consistently demands that the super-reduced rate is applied. The Rajoy administration won't budge; it has ruled out any reduction.
The government has, pretty much since it introduced IVA increases in September 2012, dropped hints about possible reductions, but for the most part it has equivocated. One area of activity which has benefited has been the buying and selling of works of art: the rate was cut from 21% to 10%. As has been pointed out, however, the two principal "collectors" of art are banks and ... the government. To the disgust of many, the government has also been looking at giving preferential tax treatment to bullfighting (it also wants to make bullfighting something in the national interest and so protect it). As with other activities branded as "entertainment" by the finance ministry, IVA on bullfighting went up to 21% in 2012.
The day without music has been organised by nineteen associations which represent more than 800 businesses involved in Spain's music industry, and tomorrow a petition with over 500,000 signatures will be handed into Congress. The demand is for live music events to be treated in the same way as, for example, newspapers: to have a 4% super-reduced rate applied. Without such a reduction, it is claimed, there will be destruction or at least a less than bright future for live music performance. The slogan for the day is "reasonable and fair IVA for music", the organisers adding that the current rate is affecting international artists: they are holding fewer concerts in Spain or none at all on account of the increased cost of tickets.
One further cause of anger and annoyance is that clubs where live music is offered are obliged to charge the higher 21% rate of IVA on drinks than the 10% rate which applies to a bar where the entertainment might stretch to no more than a television being on in the corner. (I have to say that I wasn't aware that this was the case; I wonder how widely it is in fact applied.) But as the organisers of the day without music say, it is absurd to pay double (the IVA) for having a beer while listening to, say, a jazz group.
So, will there be any music tomorrow in Mallorca? Well, yes, of course there will be, but some of the major theatres will be quiet or not presenting live music. The Es Gremi centre in Palma, for example, has cancelled a Wednesday "night of legends" and will be showing a documentary instead. Trui won't he holding anything at its theatre and it has been prominent in lending its support to the campaign, as have some leading names in the Mallorcan music world, such as the rock singer Jaume Anglada.
Saturday, February 15, 2014
Defenders Of Culture
It went very much under the radar, but last week the Spanish Government managed to slip in a small adjustment to the application of IVA. Having previously decided to reduce the maximum 21% rate for the sale of works of art to the 10% rate, commonly known as the tourist rate because it is the one which applies to certain tourist-related businesses, it said that it would be looking to possibly also reduce the 21% rate for other "cultural" activities. And last week it did just that. Final approval for these adjustments will wait until March, but there seems little doubt that the two activities so far identified as warranting the reduction will indeed benefit from it. And what is the second activity, the one that was quietly introduced last week? It is bullfighting.
When IVA was increased in September 2012, a number of activities which had until then enjoyed the reduced rate (8% before the increase to 10%) suddenly found themselves bracketed at the maximum rate. These included attractions, clubs, golf courses and many other activities which would probably not be defined as "cultural". The government, in reducing the rate for works of art, appeared to want to portray itself as defenders of culture, conveniently ignoring the fact that it, together with the banks, is the main collector of works of art in Spain. Nevertheless, and any possible vested interests aside, giving the art world some encouragement was not unwelcome. The same, however, cannot be said for the encouragement of the bullfighting industry.
Apart from its history, bullfighting qualifies as being of cultural importance (where the government is concerned) because last October Congress approved an initiative to have the bullfight declared as an example of "intangible cultural heritage of humanity" by UNESCO (this is the same award that was made to the Mallorcan Sibil·la chant). This initiative had been placed before Congress through a piece of "popular" legislation, which is the process whereby, if a required number of signatures are gathered for a petition, governments are obliged to consider legislative change or introduction. It is a process which can only be used for certain things, such as cultural activities, and the presentation of this petition to the national parliament (which required 600,000 signatures) was the same as the process in Catalonia which resulted in bullfighting being banned there (the required number of signatures was lower). Among those whose signatures appeared on the petition was Mariano Rajoy.
It shouldn't really need explaining that there was a huge chunk of politics behind the petition presented to parliament, just as it shouldn't really need explaining that the Spanish Government, i.e. the Partido Popular, has portrayed itself as the defender of the bullfight. As with art, so with the bullfight. Defenders of culture.
The announcement about the IVA reduction was overlooked because there was far more important parliamentary work last week. PSOE had attempted to overturn the introduction of the reformed abortion law. In a secret ballot in Congress, PSOE failed to do so. The new law will stand.
Reaction to confirmation of the reformed law in the Balearics led to some 80 gynecologists signing a letter calling for the law to be withdrawn; the 80 represent a majority of approximately 70%. Opposition to the reformed law has been widespread; even the Balearics health minister (Partido Popular) isn't fully in favour of it. And this opposition has centred on the lack of medical sense contained in the law. It has been condemned for having been politically motivated and politically motivated alone; a means of the Partido Popular nationally aligning itself with conservatives in the Catholic Church. It has also been condemned for being out of step with public opinion, and a Gadeso survey in the Balearics last week revealed that 71% of people were in favour of what had been a more permissive law before the government went ahead and made it that much more restrictive.
There is something rather perverse about a government which seems determined to return to the past and to ignore general public sentiment. Both bullfighting and abortion are symptomatic of that past. Franco liked nothing more than watching a bull get its ears cut off. He was of course also dead against abortion.
When IVA was increased in September 2012, a number of activities which had until then enjoyed the reduced rate (8% before the increase to 10%) suddenly found themselves bracketed at the maximum rate. These included attractions, clubs, golf courses and many other activities which would probably not be defined as "cultural". The government, in reducing the rate for works of art, appeared to want to portray itself as defenders of culture, conveniently ignoring the fact that it, together with the banks, is the main collector of works of art in Spain. Nevertheless, and any possible vested interests aside, giving the art world some encouragement was not unwelcome. The same, however, cannot be said for the encouragement of the bullfighting industry.
Apart from its history, bullfighting qualifies as being of cultural importance (where the government is concerned) because last October Congress approved an initiative to have the bullfight declared as an example of "intangible cultural heritage of humanity" by UNESCO (this is the same award that was made to the Mallorcan Sibil·la chant). This initiative had been placed before Congress through a piece of "popular" legislation, which is the process whereby, if a required number of signatures are gathered for a petition, governments are obliged to consider legislative change or introduction. It is a process which can only be used for certain things, such as cultural activities, and the presentation of this petition to the national parliament (which required 600,000 signatures) was the same as the process in Catalonia which resulted in bullfighting being banned there (the required number of signatures was lower). Among those whose signatures appeared on the petition was Mariano Rajoy.
It shouldn't really need explaining that there was a huge chunk of politics behind the petition presented to parliament, just as it shouldn't really need explaining that the Spanish Government, i.e. the Partido Popular, has portrayed itself as the defender of the bullfight. As with art, so with the bullfight. Defenders of culture.
The announcement about the IVA reduction was overlooked because there was far more important parliamentary work last week. PSOE had attempted to overturn the introduction of the reformed abortion law. In a secret ballot in Congress, PSOE failed to do so. The new law will stand.
Reaction to confirmation of the reformed law in the Balearics led to some 80 gynecologists signing a letter calling for the law to be withdrawn; the 80 represent a majority of approximately 70%. Opposition to the reformed law has been widespread; even the Balearics health minister (Partido Popular) isn't fully in favour of it. And this opposition has centred on the lack of medical sense contained in the law. It has been condemned for having been politically motivated and politically motivated alone; a means of the Partido Popular nationally aligning itself with conservatives in the Catholic Church. It has also been condemned for being out of step with public opinion, and a Gadeso survey in the Balearics last week revealed that 71% of people were in favour of what had been a more permissive law before the government went ahead and made it that much more restrictive.
There is something rather perverse about a government which seems determined to return to the past and to ignore general public sentiment. Both bullfighting and abortion are symptomatic of that past. Franco liked nothing more than watching a bull get its ears cut off. He was of course also dead against abortion.
Friday, June 07, 2013
The Super-Reduced Rajoy: Señor 4%
Mariano may be denying everything as usual but, as with his likely bowing to the Sheldon Adelson billions and so the creation of the great smoking exception at Eurovegas, chances are that he will be forced to prostrate himself in front of the Rompuy-Merkel altar and will indeed need to "touch" IVA once more.
We're not touching anything, only exploring recommendations (these recommendations being a euphemism for demands). This was what Mariano had to say on Tuesday. There are no plans to amend the structure of value added tax, he remarked on Wednesday. By Thursday, however, and even if Rajoy was continuing to deny, the ministerial supremo for industry, energy and tourism, José Manuel Soria, was suggesting that there could well be some touching up in an IVA style. Recommendations? No, you'll do as we say.
It is not known whether Sheldon has been having a word other than the one regarding permission to smoke at Eurovegas in Mariano's shell-like, but if he has, it may well be along the lines of: "Y'all know this 21% Eva for casinos. I've heard tell y'all have lower rates of Eva. I'm not talking 10%. I'm talking 4%, boy. Super reeeeduced, baby."
The super-reducing Rajoy, growing smaller by the day, will probably have some bad news for anyone inclined to ask for special dispensation and slap a mere 4% IVA on a business operation. The troika, as part of its demands (sorry, recommendations) has been eyeing up the super-reduced rate of 4%. We know this because, although Mariano has been mute on the subject, JoSo at industry, energy and tourism has been singing like a canary; appropriately enough for a former president of the Canary Islands. The demands-recommendations have fingered the 4%, JoSo has admitted, and they are going to be touched up and will head upwards. To 10%. Or more. Possibly.
And to what types of service or product does the super-reduced rate currently apply? Basic food products are one, pharmaceutical products another. And then there is the written word. Books are 4%, so also are newspapers.
Soria has said that other countries apply higher rates for products which are super-reduced in Spain, and he's right, some countries do. But then some others, and the UK is one, apply a zero rate to newspapers. Osborne hasn't been so mad as to incur the eternal wrath of the "Mail" or "The Telegraph" by slapping VAT on them. Actually, it is not a case of not being mad. In a democracy where there is a premium on the value of information, no premium is attached to its price. Spain has attempted to keep this premium as low as possible, but it may just have lost the struggle.
The Newspaper Society in the UK is one organisation that has been to the fore in guaranteeing that the zero rate of VAT is maintained. It has also campaigned for zero rates in Europe. Were there to ever be harmonisation of VAT throughout the European Union, the zero rate on newspapers would, the Society hopes, be adopted.
The need for deficit reduction, however, cares little for the democratic principle of making information as cheap as possible. One can argue that, especially under difficult economic conditions, the exemptions of zero rating or super-reduction should be scrapped. If certain products and services have had to suffer rises, then why not others? (And it should be noted that, of the three rates of Spanish IVA, the super-reduced rate has been the only one that has not been raised.)
Yes, one can argue this, but there is a further principle of facilitating reading. It should also be noted that Spanish parents were hit with a significant rise in IVA for most school materials last September. Books might now become more expensive and so there is, therefore, an educational principle to be taken account of as well.
And while the cost of a newspaper or a book might rise because of an increase in IVA, the cost of production would also, in all likelihood, rise. Printing a newspaper attracts 4% IVA, while most other printing is charged at 21%. Inputs and outputs there are in value added tax, but they don't mean that prices don't rise or margins aren't eroded.
There is a perversity in European demands to increase the super-reduced rate. On the one hand, there is the Newspaper Society lobbying and gaining a general consensus about future zero rating and the European Union standing for freedom of information and the democratic principle of information. On the other hand, this same union might make Spain increase the price of democracy. This recommendation, at least, should be resisted.
Any comments to andrew@thealcudiaguide.com please.
We're not touching anything, only exploring recommendations (these recommendations being a euphemism for demands). This was what Mariano had to say on Tuesday. There are no plans to amend the structure of value added tax, he remarked on Wednesday. By Thursday, however, and even if Rajoy was continuing to deny, the ministerial supremo for industry, energy and tourism, José Manuel Soria, was suggesting that there could well be some touching up in an IVA style. Recommendations? No, you'll do as we say.
It is not known whether Sheldon has been having a word other than the one regarding permission to smoke at Eurovegas in Mariano's shell-like, but if he has, it may well be along the lines of: "Y'all know this 21% Eva for casinos. I've heard tell y'all have lower rates of Eva. I'm not talking 10%. I'm talking 4%, boy. Super reeeeduced, baby."
The super-reducing Rajoy, growing smaller by the day, will probably have some bad news for anyone inclined to ask for special dispensation and slap a mere 4% IVA on a business operation. The troika, as part of its demands (sorry, recommendations) has been eyeing up the super-reduced rate of 4%. We know this because, although Mariano has been mute on the subject, JoSo at industry, energy and tourism has been singing like a canary; appropriately enough for a former president of the Canary Islands. The demands-recommendations have fingered the 4%, JoSo has admitted, and they are going to be touched up and will head upwards. To 10%. Or more. Possibly.
And to what types of service or product does the super-reduced rate currently apply? Basic food products are one, pharmaceutical products another. And then there is the written word. Books are 4%, so also are newspapers.
Soria has said that other countries apply higher rates for products which are super-reduced in Spain, and he's right, some countries do. But then some others, and the UK is one, apply a zero rate to newspapers. Osborne hasn't been so mad as to incur the eternal wrath of the "Mail" or "The Telegraph" by slapping VAT on them. Actually, it is not a case of not being mad. In a democracy where there is a premium on the value of information, no premium is attached to its price. Spain has attempted to keep this premium as low as possible, but it may just have lost the struggle.
The Newspaper Society in the UK is one organisation that has been to the fore in guaranteeing that the zero rate of VAT is maintained. It has also campaigned for zero rates in Europe. Were there to ever be harmonisation of VAT throughout the European Union, the zero rate on newspapers would, the Society hopes, be adopted.
The need for deficit reduction, however, cares little for the democratic principle of making information as cheap as possible. One can argue that, especially under difficult economic conditions, the exemptions of zero rating or super-reduction should be scrapped. If certain products and services have had to suffer rises, then why not others? (And it should be noted that, of the three rates of Spanish IVA, the super-reduced rate has been the only one that has not been raised.)
Yes, one can argue this, but there is a further principle of facilitating reading. It should also be noted that Spanish parents were hit with a significant rise in IVA for most school materials last September. Books might now become more expensive and so there is, therefore, an educational principle to be taken account of as well.
And while the cost of a newspaper or a book might rise because of an increase in IVA, the cost of production would also, in all likelihood, rise. Printing a newspaper attracts 4% IVA, while most other printing is charged at 21%. Inputs and outputs there are in value added tax, but they don't mean that prices don't rise or margins aren't eroded.
There is a perversity in European demands to increase the super-reduced rate. On the one hand, there is the Newspaper Society lobbying and gaining a general consensus about future zero rating and the European Union standing for freedom of information and the democratic principle of information. On the other hand, this same union might make Spain increase the price of democracy. This recommendation, at least, should be resisted.
Any comments to andrew@thealcudiaguide.com please.
Thursday, April 25, 2013
Death, Taxes And Holidaymaking
If you are inclined to pay any attention to statistics, you may have noticed that, in the first three months of this year, tourism in Catalonia increased to the extent that it represented a quarter of Spain's total tourism. Does Catalonia having been a mere 5% behind the Canaries tell a story over and above its statistical one? It may do. The tourist tax, which was implemented last autumn, appears not to have had a negative effect.
Prime Minister Rajoy is to agree a new set of economic measures on Friday. He has said that there will be no further rises in either income tax or IVA (VAT), though there has been speculation that the lower, tourist rate of IVA might go up. Rajoy has said it won't, so if it does, then he will have been, and not for the first time, economical with the economic truth.
If the lower rate does escape the government's attention on Friday, it might not do in the future. The 11% difference between the standard and lower rate allows some manoeuvre-room for a deficit-busting government that somehow still manages not to reduce the deficit. The minister of contradiction (his own), Luis de Guindos, told parliament yesterday that the economy will be getting better sooner than had been thought. As he had told an American newspaper the other day that the economy will contract this year more than had been thought, then it is hard, as it always is, to know what Sr. de Guindos really does think. If he thinks at all.
But then maybe he is thinking. If we put the good old tourist IVA rate up again, perhaps his predictions of growth (minimal) in 2014 won't come to pass. Best maybe that IVA be left alone, as relentlessly upping the indirect-taxation ante ain't the best remedy for reversing a contracting economy. Yet, despite this apparent truism, in Catalonia, a tourist tax, coming on top of the IVA rise in September, does not seem to have made much difference, other than to in fact increase tourism. How very odd.
A recent report for "Hosteltur" magazine picked up on an anxiety expressed by the World Travel and Tourism Council about the inclination for governments, not just Spain's or the regional one in the Balearics, to raise taxes that apply to the tourism sector or to invent new ones. The report used the adjective "estrujado". Its verb, "estrujar", has multiple meanings - to crush, to squeeze, to bleed or to drain. Any of these would be appropriate, though the bleed one is perhaps the most appropriate. It is the life-force-removal consequence of tourism being "ordeñado" - from the verb "ordeñar", to milk. Tourism is the milch cow, its udders to be squeezed and squeezed by demands for tax and more tax.
Or so it appears. The tourism industry chattering classes have raised the demon of taxes to a level that they have assumed potentially greater damage than that which might in the past have been caused by aircraft falling out of the sky, civil unrest or natural disaster. Taxes are the new act of God. Or are they?
IVA and Catalonia's tourist tax are not the only taxes which have an impact on the tourism industry. They have been coming thick and fast in recent times. Property taxes have risen, town halls have found new ways to raise tax, the Balearic Government has come up with its laughably monikered "green taxes", the AENA airports authority has increased its charges, governments (the British and the German ones, for example) have upped air duties. One tax after another; each one catches tourism in its net and every tourism organisation, be it representative of hotels, car hire, attractions, restaurants or whatever, cries competitive-loss foul.
A while ago, I suggested that the Catalonians may find that their tourist tax proves not to be price-sensitive and so therefore not price-elastic. Evidence from the first quarter of this year might indicate that I was right, but intuitively you feel that the cumulative effect of all the milking, squeezing and bleeding will be to stretch the elastic to snapping point; the tourism industry would find itself caught with its pants down and its crown jewels exposed to a witheringly icy tax breeze.
Perhaps governments calculate that there is no snapping point and believe that there are not two but three certainties - death, taxes and a determination to take holidays. And maybe they are right. Even if they are, there will still be a squeeze. It won't necessarily be one on airlines or hotels, but one on the rest of the tourism economy. There's now a fourth certainty. Holidaymakers' budgets.
Any comments to andrew@thealcudiaguide.com please.
Prime Minister Rajoy is to agree a new set of economic measures on Friday. He has said that there will be no further rises in either income tax or IVA (VAT), though there has been speculation that the lower, tourist rate of IVA might go up. Rajoy has said it won't, so if it does, then he will have been, and not for the first time, economical with the economic truth.
If the lower rate does escape the government's attention on Friday, it might not do in the future. The 11% difference between the standard and lower rate allows some manoeuvre-room for a deficit-busting government that somehow still manages not to reduce the deficit. The minister of contradiction (his own), Luis de Guindos, told parliament yesterday that the economy will be getting better sooner than had been thought. As he had told an American newspaper the other day that the economy will contract this year more than had been thought, then it is hard, as it always is, to know what Sr. de Guindos really does think. If he thinks at all.
But then maybe he is thinking. If we put the good old tourist IVA rate up again, perhaps his predictions of growth (minimal) in 2014 won't come to pass. Best maybe that IVA be left alone, as relentlessly upping the indirect-taxation ante ain't the best remedy for reversing a contracting economy. Yet, despite this apparent truism, in Catalonia, a tourist tax, coming on top of the IVA rise in September, does not seem to have made much difference, other than to in fact increase tourism. How very odd.
A recent report for "Hosteltur" magazine picked up on an anxiety expressed by the World Travel and Tourism Council about the inclination for governments, not just Spain's or the regional one in the Balearics, to raise taxes that apply to the tourism sector or to invent new ones. The report used the adjective "estrujado". Its verb, "estrujar", has multiple meanings - to crush, to squeeze, to bleed or to drain. Any of these would be appropriate, though the bleed one is perhaps the most appropriate. It is the life-force-removal consequence of tourism being "ordeñado" - from the verb "ordeñar", to milk. Tourism is the milch cow, its udders to be squeezed and squeezed by demands for tax and more tax.
Or so it appears. The tourism industry chattering classes have raised the demon of taxes to a level that they have assumed potentially greater damage than that which might in the past have been caused by aircraft falling out of the sky, civil unrest or natural disaster. Taxes are the new act of God. Or are they?
IVA and Catalonia's tourist tax are not the only taxes which have an impact on the tourism industry. They have been coming thick and fast in recent times. Property taxes have risen, town halls have found new ways to raise tax, the Balearic Government has come up with its laughably monikered "green taxes", the AENA airports authority has increased its charges, governments (the British and the German ones, for example) have upped air duties. One tax after another; each one catches tourism in its net and every tourism organisation, be it representative of hotels, car hire, attractions, restaurants or whatever, cries competitive-loss foul.
A while ago, I suggested that the Catalonians may find that their tourist tax proves not to be price-sensitive and so therefore not price-elastic. Evidence from the first quarter of this year might indicate that I was right, but intuitively you feel that the cumulative effect of all the milking, squeezing and bleeding will be to stretch the elastic to snapping point; the tourism industry would find itself caught with its pants down and its crown jewels exposed to a witheringly icy tax breeze.
Perhaps governments calculate that there is no snapping point and believe that there are not two but three certainties - death, taxes and a determination to take holidays. And maybe they are right. Even if they are, there will still be a squeeze. It won't necessarily be one on airlines or hotels, but one on the rest of the tourism economy. There's now a fourth certainty. Holidaymakers' budgets.
Any comments to andrew@thealcudiaguide.com please.
Thursday, January 31, 2013
The Incredible Shrinking Spanish Economy
The Spanish economy shrank again in the final quarter of 2012. The provisional figure for the slump during the whole of 2012 is 1.4%, worse than the Bank of Spain had been predicting only a few days ago. Never mind though, the minister for the economy, Luis de Guindos, says that the slump hasn't been as bad as predicted. You pays yer money, you takes yer choice as to whose version you prefer. If you had any money, that is.
The output figure is one piece of bad economic news, the other is the level of unemployment - 26% of the total workforce, with unemployment among the young now reaching 60%. Sixty per cent. Just hold that thought and ask yourself what the future holds for this unemployed youth.
The lost generation of Spain's youth is increasingly looking abroad for work. Overall, there was an exit of over 40,000 people from Spain during the first half of 2012, and many of them are heading to the UK. As the Trans-Iberian blog from "El País" points out, the volume of applications for UK National Insurance numbers by Spanish migrants is second only to those made by people from Pakistan.
It's not as if the young are going to the UK and finding employment commensurate with their qualifications. They are taking bar work, any menial tasks, but at least there is some prospect of work. What is there in Spain? Nada.
The recessionary statistic for the final quarter should not come as a great surprise. It can be partly explained by consumption having been squeezed into the third quarter in order to avoid the rise in prices as a consequence of the increase in IVA (VAT) at the start of September. There are other factors, though, one of them being an impact of the government's labour reforms. Welcomed by some, these reforms have nevertheless contributed to a further weakening of confidence. If job security is lessened, so is the temptation to consume.
De Guindos reckons that positive growth will return in the second half of this year. He may be right, but you shouldn't put money on this either. De Guindos is prone to talking rubbish. (The IMF haven't said as much but disagree with his forecast.) At the end of April last year, let me remind you, he dismissed the idea of increasing IVA until this year. His rationale, if you can consider it rational, was that growth would have kicked in in 2013 and so the time would have arrived to raise indirect tax. Seriously, this is a minister responsible for economic affairs. Not only was he wrong about the IVA rise, as it was made four months later, he was also wrong in his thinking. If there were growth, the last thing that was needed was to stop it in its tracks by increasing tax.
It is a cliché to suggest that politicians don't know what they are doing. Some do. But as far as Spain's are concerned, they do their utmost in proving the cliché to be right. The austerity measures are taking Spain nowhere, except further inside its own basket case. The enormity of the poverty of political economic thought is matched only by the enormity of the brassnecked spin. Take the Balearics own economic genius, José Aguilo. Tax increases will stimulate the economy, he stated earlier this month. The screeches of laughter were drowned out only by the screams of despair. Aguiló's probably next in line for a Madrid cabinet position.
The Balearics finance (and employment and business) minister believes that the rise in taxes will help entrepreneurs because of a consequent lowering in interest rates. But who will be doing any lending? Entrepreneurship is the current flavour of the month of both the regional and national government. Rajoy has announced tax cuts for young entrepreneurs. So what? Growth measures are what will help these entrepreneurs. And credit. Unavailable credit.
But what about tax cuts for everyone else? There is a growing counter-argument to the austerity strategy imposed by the Spanish Government and imposed on it by forces from outside. Spain's problems with its borrowing rate have been eased thanks to European Central Bank intervention. We know what the pound (or euro) of flesh has had to be for this intervention, but what on earth is austerity ever going to achieve? Consider this. If it takes 2% economic growth to cut unemployment by 1% (a not untypical ratio), how long will it be before the 26% unemployment rate is lowered at all significantly? An awfully long time, always assuming there were such growth. And where's this going to come from?
Any comments to andrew@thealcudiaguide.com please.
Index for January 2013
Balearics tourism promotion action plan - 26 January 2013
Bishop of Mallorca - 12 January 2013
Bradley Wiggins and cycling tourism promotion - 27 January 2013
Broadcasting interference in Spain - 24 January 2013
Floating Spain on the stock market - 2 January 2013
Foodstagramming - 29 January 2013
Glosadors - 13 January 2013
Hainan: where Mallorca can't compete - 4 January 2013
Handball - 16 January 2013
Health and safety and traditions - 9 January 2012
Ill Manors adaptation - 19 January 2013
Luis Bárcenas and Partido Popular corruption - 21 January 2013
Madrid Olympics bid - 3 January 2013
Magalluf and Trip Advisor - 30 January 2013
Mallorcan attitudes and winter tourism - 6 January 2013
Osborne bull vandalised again - 1 January 2013
Paradores - 25 January 2013
Pollensa festival funding - 22 January 2013
Porto Cristo's name - 17 January 2013
Reading and misinterpretation or misunderstanding - 7 January 2013
Sant Sebastià: the legend and gay icon - 14 January 2013
Spain stuck in the 1930s - 28 January 2013
Spanish and Latin rock music - 23 January 2013
Spanish economy and unemployment - 31 January 2013
Spanish military, Republicanism and independence - 11 January 2013
The Truth About Magalluf - 5 January 2013, 10 January 2013, 20 January 2013
Tourism areas developments - 8 January 2013
UK resident population in Mallorca - 18 January 2013
Winter season: will there ever be one? - 15 January 2013
The output figure is one piece of bad economic news, the other is the level of unemployment - 26% of the total workforce, with unemployment among the young now reaching 60%. Sixty per cent. Just hold that thought and ask yourself what the future holds for this unemployed youth.
The lost generation of Spain's youth is increasingly looking abroad for work. Overall, there was an exit of over 40,000 people from Spain during the first half of 2012, and many of them are heading to the UK. As the Trans-Iberian blog from "El País" points out, the volume of applications for UK National Insurance numbers by Spanish migrants is second only to those made by people from Pakistan.
It's not as if the young are going to the UK and finding employment commensurate with their qualifications. They are taking bar work, any menial tasks, but at least there is some prospect of work. What is there in Spain? Nada.
The recessionary statistic for the final quarter should not come as a great surprise. It can be partly explained by consumption having been squeezed into the third quarter in order to avoid the rise in prices as a consequence of the increase in IVA (VAT) at the start of September. There are other factors, though, one of them being an impact of the government's labour reforms. Welcomed by some, these reforms have nevertheless contributed to a further weakening of confidence. If job security is lessened, so is the temptation to consume.
De Guindos reckons that positive growth will return in the second half of this year. He may be right, but you shouldn't put money on this either. De Guindos is prone to talking rubbish. (The IMF haven't said as much but disagree with his forecast.) At the end of April last year, let me remind you, he dismissed the idea of increasing IVA until this year. His rationale, if you can consider it rational, was that growth would have kicked in in 2013 and so the time would have arrived to raise indirect tax. Seriously, this is a minister responsible for economic affairs. Not only was he wrong about the IVA rise, as it was made four months later, he was also wrong in his thinking. If there were growth, the last thing that was needed was to stop it in its tracks by increasing tax.
It is a cliché to suggest that politicians don't know what they are doing. Some do. But as far as Spain's are concerned, they do their utmost in proving the cliché to be right. The austerity measures are taking Spain nowhere, except further inside its own basket case. The enormity of the poverty of political economic thought is matched only by the enormity of the brassnecked spin. Take the Balearics own economic genius, José Aguilo. Tax increases will stimulate the economy, he stated earlier this month. The screeches of laughter were drowned out only by the screams of despair. Aguiló's probably next in line for a Madrid cabinet position.
The Balearics finance (and employment and business) minister believes that the rise in taxes will help entrepreneurs because of a consequent lowering in interest rates. But who will be doing any lending? Entrepreneurship is the current flavour of the month of both the regional and national government. Rajoy has announced tax cuts for young entrepreneurs. So what? Growth measures are what will help these entrepreneurs. And credit. Unavailable credit.
But what about tax cuts for everyone else? There is a growing counter-argument to the austerity strategy imposed by the Spanish Government and imposed on it by forces from outside. Spain's problems with its borrowing rate have been eased thanks to European Central Bank intervention. We know what the pound (or euro) of flesh has had to be for this intervention, but what on earth is austerity ever going to achieve? Consider this. If it takes 2% economic growth to cut unemployment by 1% (a not untypical ratio), how long will it be before the 26% unemployment rate is lowered at all significantly? An awfully long time, always assuming there were such growth. And where's this going to come from?
Any comments to andrew@thealcudiaguide.com please.
Index for January 2013
Balearics tourism promotion action plan - 26 January 2013
Bishop of Mallorca - 12 January 2013
Bradley Wiggins and cycling tourism promotion - 27 January 2013
Broadcasting interference in Spain - 24 January 2013
Floating Spain on the stock market - 2 January 2013
Foodstagramming - 29 January 2013
Glosadors - 13 January 2013
Hainan: where Mallorca can't compete - 4 January 2013
Handball - 16 January 2013
Health and safety and traditions - 9 January 2012
Ill Manors adaptation - 19 January 2013
Luis Bárcenas and Partido Popular corruption - 21 January 2013
Madrid Olympics bid - 3 January 2013
Magalluf and Trip Advisor - 30 January 2013
Mallorcan attitudes and winter tourism - 6 January 2013
Osborne bull vandalised again - 1 January 2013
Paradores - 25 January 2013
Pollensa festival funding - 22 January 2013
Porto Cristo's name - 17 January 2013
Reading and misinterpretation or misunderstanding - 7 January 2013
Sant Sebastià: the legend and gay icon - 14 January 2013
Spain stuck in the 1930s - 28 January 2013
Spanish and Latin rock music - 23 January 2013
Spanish economy and unemployment - 31 January 2013
Spanish military, Republicanism and independence - 11 January 2013
The Truth About Magalluf - 5 January 2013, 10 January 2013, 20 January 2013
Tourism areas developments - 8 January 2013
UK resident population in Mallorca - 18 January 2013
Winter season: will there ever be one? - 15 January 2013
Thursday, September 06, 2012
Just Another Normal Return To School
It hardly seems any time since the youth of northern Mallorca were descending on Puerto Alcúdia for their end-of-school-year drinkathon in June. The long hot summer has all but passed the island's minors by. Return to school. "Vuelta al cole" is just around the corner.
The start of the school year is always given a great deal of prominence by the media. One is tempted to think that this is due to the fact that some schooling is actually taking place for once, though, as has been pointed out (not least by myself), total school hours in Spain aren't that far behind those in England where annual school hours are among the longest. And as a reflection of this media prominence, I, as has now become traditional, add to the column inches.
The return to school is fascinating because of its ritualistic nature and because of all the raft of statistics which are trotted out and political statements which accompany it. The greatest ritual is to declare on the day of the return to school that it has been "normal", which has long led me to wonder what would constitute an abnormal return to school. Thanks to the regional government, education minister Rafael Bosch, stroppy parents, stroppy teachers, the endless language argument, Catalan bows, the Balearics Institute of Family Policy and the rise in IVA, we are about to find out.
By the start of this school year, or so said Herr Bosch at this time last year, there was meant to have been equality between Catalan and Castellano in Mallorca's educational system. This less than normal state of affairs, given that Catalan has dominated, is not about to come to pass. The wholesale introduction of "free selection" of language was watered down, the free selection where it was to be applied (infant and early primary) has been largely rejected by parents who continue to favour Catalan, and where there is to be equality, the teachers for the most part seem unsure how it is going to be implemented.
The language argument may seem to have dominated the educational agenda, but the teachers have other concerns which are just as controversial. They are expected to teach for longer, to teach larger classes and to be paid less. Which sounds wonderful for morale, as indeed does the fact that the government have been less than forthcoming in handing over money to schools since April this year.
It is the purely educational matter of class sizes and teaching resources that has inspired a campaign known as "Así no empieza mi hijo" promoted by the parents federation. It means that some parents are threatening to boycott the start of the school year by keeping their children at home, which does sound decidedly abnormal.
Into the fray on this particular abnormality has entered the Institute of Family Policy. It has denounced the parents to the ombudsman, claiming that fundamental rights of children will be violated by this boycott. Which is all quite interesting; an institute for family policy denouncing families, but such is how things work here. But then, the institute is an interesting body. A couple of years ago it was to the fore in seeking to ban topless sunbathing (rights and protection of children and all that). If you can be bothered to (and I have), some judicious Googling can reveal some just as interesting associations that this institute has. Let's simply say that it isn't exactly liberal.
I'm not sure what the institute has to say on the matter of IVA but there are plenty of families in Mallorca and in Spain that have been presented with a greatly increased bill for this school year. If you think a three per cent rise on the general rate is steep, then it is nothing compared with the 17% rise (4% to 21%) for school material (with the exception of books).
So, what have we got? Teachers hacked off, larger class sizes, schools not getting money they are owed, the language policy in disarray, parents being denounced, cost of sending children to school increasing. Enough for you? Well, there is also the matter of the Catalan bows hanging outside some schools to be made more of an issue of, a minor issue in truth when compared with the continuing poor performance of the state education sector in Mallorca, a problem which consultants McKinsey have been addressing by arguing in favour of the adoption of an English system (God help the local schools if this means performance league tables).
Yep, the return to school sounds as though it will be perfectly normal.
Any comments to andrew@thealcudiaguide.com please.
The start of the school year is always given a great deal of prominence by the media. One is tempted to think that this is due to the fact that some schooling is actually taking place for once, though, as has been pointed out (not least by myself), total school hours in Spain aren't that far behind those in England where annual school hours are among the longest. And as a reflection of this media prominence, I, as has now become traditional, add to the column inches.
The return to school is fascinating because of its ritualistic nature and because of all the raft of statistics which are trotted out and political statements which accompany it. The greatest ritual is to declare on the day of the return to school that it has been "normal", which has long led me to wonder what would constitute an abnormal return to school. Thanks to the regional government, education minister Rafael Bosch, stroppy parents, stroppy teachers, the endless language argument, Catalan bows, the Balearics Institute of Family Policy and the rise in IVA, we are about to find out.
By the start of this school year, or so said Herr Bosch at this time last year, there was meant to have been equality between Catalan and Castellano in Mallorca's educational system. This less than normal state of affairs, given that Catalan has dominated, is not about to come to pass. The wholesale introduction of "free selection" of language was watered down, the free selection where it was to be applied (infant and early primary) has been largely rejected by parents who continue to favour Catalan, and where there is to be equality, the teachers for the most part seem unsure how it is going to be implemented.
The language argument may seem to have dominated the educational agenda, but the teachers have other concerns which are just as controversial. They are expected to teach for longer, to teach larger classes and to be paid less. Which sounds wonderful for morale, as indeed does the fact that the government have been less than forthcoming in handing over money to schools since April this year.
It is the purely educational matter of class sizes and teaching resources that has inspired a campaign known as "Así no empieza mi hijo" promoted by the parents federation. It means that some parents are threatening to boycott the start of the school year by keeping their children at home, which does sound decidedly abnormal.
Into the fray on this particular abnormality has entered the Institute of Family Policy. It has denounced the parents to the ombudsman, claiming that fundamental rights of children will be violated by this boycott. Which is all quite interesting; an institute for family policy denouncing families, but such is how things work here. But then, the institute is an interesting body. A couple of years ago it was to the fore in seeking to ban topless sunbathing (rights and protection of children and all that). If you can be bothered to (and I have), some judicious Googling can reveal some just as interesting associations that this institute has. Let's simply say that it isn't exactly liberal.
I'm not sure what the institute has to say on the matter of IVA but there are plenty of families in Mallorca and in Spain that have been presented with a greatly increased bill for this school year. If you think a three per cent rise on the general rate is steep, then it is nothing compared with the 17% rise (4% to 21%) for school material (with the exception of books).
So, what have we got? Teachers hacked off, larger class sizes, schools not getting money they are owed, the language policy in disarray, parents being denounced, cost of sending children to school increasing. Enough for you? Well, there is also the matter of the Catalan bows hanging outside some schools to be made more of an issue of, a minor issue in truth when compared with the continuing poor performance of the state education sector in Mallorca, a problem which consultants McKinsey have been addressing by arguing in favour of the adoption of an English system (God help the local schools if this means performance league tables).
Yep, the return to school sounds as though it will be perfectly normal.
Any comments to andrew@thealcudiaguide.com please.
Friday, August 10, 2012
VAT: Robin Hood and other problems
The extent of the application of the rise in IVA (VAT) has caught some people on the hop, and it is the recategorisation of businesses and services that will be liable for the general higher rate of 21% that has caught most out. From 1 September, there will be far fewer businesses than at present which will still benefit from the reduced rate (of 10%). In the tourism sector, these are basically hotels and restaurants. More or less everything else will be subject to 21% - clubs and discos, theme parks and attractions, sports facilities (including golf courses), health and beauty.
Value added tax is a highly discriminatory tax. It discriminates against the less well off and it also discriminates against or in favour of different business sectors. They wouldn't thank for me suggesting it, but why should bars and restaurants be treated differently to clubs? In a tourist sense, they are a part of the same thing, the so-called complementary offer, so why penalise one and not the other?
It would be argued that restaurants aren't solely for tourists (though neither are clubs) and that keeping IVA down enables the masses to feed themselves. Well yes, but then the masses can also feed themselves in a different way. By shopping. And IVA rates are either reduced or "super-reduced" for foodstuffs and beverages, with an exception for alcohol which attracts the higher rate, thus leading to the curious situation whereby a drink in a bar has a lower rate of IVA than the same drink that has been bought from a supermarket.
Business associations have not been slow in warning of the dire consequences of the IVA rise. From loss of general competitiveness to tourism taking a hit to hairdressing salons being cut and blown away, everyone is speaking with one voice, which even includes the government; its ministers admit that the IVA rise isn't going to be good for business, but then we all know that Spain's ministers don't have any say in how the economy is run.
Is the IVA rise going to have as harmful an impact on tourism as it is being suggested it might? In one respect, it is unlikely to. Tourism to Mallorca is remarkably durable, even if the level of tourism spend has been less durable. Putting up prices because of higher IVA rates will make this spend lower, but it doesn't follow that tourism itself would fall.
There is some validity in the argument that countries (Portugal, Greece) which have reduced VAT in the tourist sector will benefit at the expense of Mallorca and Spain, but they can benefit only by so much, the benefit being determined by supply. There again, do tourists make decisions based on rates of value added tax in different countries? They do make them based on price, but the price decision is more one of the cost of the package or the flight and the accommodation rather than how much it might cost to enter an attraction. Though tourists are way more savvy in their budgeting (and necessarily so) than was the case in the good old days of worthless pesetas and a bevvy costing a mere ten of these worthless coins, there is also a psychology of purchasing by the unit; hence, x number of meals out or y number of excursions (y probably equalling one nowadays) for which the decision is of course price sensitive but not exclusively so.
Tourism will be affected (and one might point out that golf could really lose out if the greens fees, already considered high in Mallorca, were to go up markedly) but not as much as is feared. The real killer isn't for tourism, it is for the domestic market. The constant rise in the cost of living is reaching a point, if it hasn't already, where it cannot be sustained without dire consequences of a different nature to those predicted for businesses. It isn't only IVA. If you pay 20 euros to put petrol into your car, you now get one euro's worth less, ever since the tax to pay for the health service was introduced in the Balearics. This is just one example.
Summer and the tourism season give false impressions. The season will finish soon enough. Then what? Unemployment going up, benefits down, IVA effects coming in, the tourism season is still in full swing in Andalucia and yet unionists have been helping themselves to supermarket goods and handing them out to those who have no means. Such Robin Hood acts could catch on, rather like a less benign form of robbery already has - house break-ins up massively in Mallorca. Things are about to get nasty.
Any comments to andrew@thealcudiaguide.com please.
Value added tax is a highly discriminatory tax. It discriminates against the less well off and it also discriminates against or in favour of different business sectors. They wouldn't thank for me suggesting it, but why should bars and restaurants be treated differently to clubs? In a tourist sense, they are a part of the same thing, the so-called complementary offer, so why penalise one and not the other?
It would be argued that restaurants aren't solely for tourists (though neither are clubs) and that keeping IVA down enables the masses to feed themselves. Well yes, but then the masses can also feed themselves in a different way. By shopping. And IVA rates are either reduced or "super-reduced" for foodstuffs and beverages, with an exception for alcohol which attracts the higher rate, thus leading to the curious situation whereby a drink in a bar has a lower rate of IVA than the same drink that has been bought from a supermarket.
Business associations have not been slow in warning of the dire consequences of the IVA rise. From loss of general competitiveness to tourism taking a hit to hairdressing salons being cut and blown away, everyone is speaking with one voice, which even includes the government; its ministers admit that the IVA rise isn't going to be good for business, but then we all know that Spain's ministers don't have any say in how the economy is run.
Is the IVA rise going to have as harmful an impact on tourism as it is being suggested it might? In one respect, it is unlikely to. Tourism to Mallorca is remarkably durable, even if the level of tourism spend has been less durable. Putting up prices because of higher IVA rates will make this spend lower, but it doesn't follow that tourism itself would fall.
There is some validity in the argument that countries (Portugal, Greece) which have reduced VAT in the tourist sector will benefit at the expense of Mallorca and Spain, but they can benefit only by so much, the benefit being determined by supply. There again, do tourists make decisions based on rates of value added tax in different countries? They do make them based on price, but the price decision is more one of the cost of the package or the flight and the accommodation rather than how much it might cost to enter an attraction. Though tourists are way more savvy in their budgeting (and necessarily so) than was the case in the good old days of worthless pesetas and a bevvy costing a mere ten of these worthless coins, there is also a psychology of purchasing by the unit; hence, x number of meals out or y number of excursions (y probably equalling one nowadays) for which the decision is of course price sensitive but not exclusively so.
Tourism will be affected (and one might point out that golf could really lose out if the greens fees, already considered high in Mallorca, were to go up markedly) but not as much as is feared. The real killer isn't for tourism, it is for the domestic market. The constant rise in the cost of living is reaching a point, if it hasn't already, where it cannot be sustained without dire consequences of a different nature to those predicted for businesses. It isn't only IVA. If you pay 20 euros to put petrol into your car, you now get one euro's worth less, ever since the tax to pay for the health service was introduced in the Balearics. This is just one example.
Summer and the tourism season give false impressions. The season will finish soon enough. Then what? Unemployment going up, benefits down, IVA effects coming in, the tourism season is still in full swing in Andalucia and yet unionists have been helping themselves to supermarket goods and handing them out to those who have no means. Such Robin Hood acts could catch on, rather like a less benign form of robbery already has - house break-ins up massively in Mallorca. Things are about to get nasty.
Any comments to andrew@thealcudiaguide.com please.
Friday, July 13, 2012
Empire Of The Sun: Balearics poverty
The Spanish word "miseria" can have different meanings. Whichever one you take, they amount to much the same thing. Misery, wretchedness, poverty; they are indistinguishable.
The latest survey of poverty makes the Balearics the fourth poorest region of Spain or, if you prefer your translation, the region which, after the Canaries, Extremadura and Andalucía, is the fourth most miserable and the fourth most wretched. Such a conclusion doesn't do much for all the paradise island guff. It also doesn't do much for the poor who are about to be slammed with a rise in the cost of living because of the increase in IVA. To put this rise in some sort of context, it is estimated that it will cost each household a bit over 700 euros more a year. This in a country where the minimum salary is under 700 (it is in fact around 640 euros per month).
The poverty statistics for the Balearics are bad enough, but if you take them for Spain as a whole, then they are even worse. Spain has the highest index of poverty in the whole of the European Union. And this is a country that is meant to be among the world's richest countries, if only determined by IMF figures for GDP. Yet it isn't surprising. I drew a comparison yesterday with the French minimum salary. This comparison, and comparisons with other European countries, together with their respective general rates of value added tax, are being widely made. There is a very good reason why. Rajoy in his address on Black Wednesday had the brass neck to say that the French rate of VAT was higher than Spain's. Yes, it is, but it won't be once the 21% rate comes in, but more pertinent is the comparative level of income. It is typical for politicians to be economic with their facts, and Rajoy is certainly no different.
The misery and additional poverty that the Spanish Government is about to inflict on the Balearics (and the nation) are not matched by the demeanour of these politicians. The PSOE party locally has gone on Facebook to show a photo of an Italian politician in tears when the announcement had to be made of cuts. It is compared with a truly abhorrent, horrible photo of Rajoy being applauded by members of his cabinet after his address on Wednesday. How dare they? They should hang their heads in shame. Italian politicians could empathise with the misery by being miserable. The Spanish ones can't. They are a disgrace.
In addition to the survey on poverty, another report has been issued. This one calculates that one in four people in the Balearics is at the risk of poverty, a figure that has risen by around 20,000 people in three years. And while this risk increases, the aid, what little there is because Spain isn't particularly generous anyway, is being cut. It is said that the cut to unemployment benefit, another element of the Black Wednesday announcement which Rajoy's cronies were so determined to applaud, will hit the Balearics harder than anywhere because of the dependence upon tourism and therefore the high level of seasonal employment (and unemployment).
The Balearics may not be the worst affected, but if not, this will be because either the Canaries or Andalucía is more affected. Two other regions with the highest levels of poverty, misery and wretchedness.
Yet, how can this all be, some will ask. The wonderful weather, the wonderful lifestyle, the wonderful people, the wonderful ... . Oh, do shut up. It is no coincidence that the Balearics, the Canaries and the region that is home to the Costa del Sol have such high levels of poverty. Each is dependent upon tourism and each employs people on low wages who are finding it increasingly difficult to even obtain employment contracts long enough to enable them to qualify for benefit.
The paradise island line is a facade, a statement of unreality. It is one trotted out by ignorant or smug expatriates who have not the faintest idea. Or one used by visitors who are similarly ignorant. They at least can be excused.
It is the facade, the superficiality of beach lifestyle, of the yacht club, of the golf club, of the doing lunch, of the doing dinner. It is one behind which many can shield themselves. Yet it is a facade that is showing signs of cracking. The Empire of the Sun on the paradise island may not be subject to anything as dramatic as an invasion force turning a world of smug aloofness and parties upside down, but the sun is lowering. It is not going down and never will, but no empire ever lasted.
Any comments to andrew@thealcudiaguide.com please.
The latest survey of poverty makes the Balearics the fourth poorest region of Spain or, if you prefer your translation, the region which, after the Canaries, Extremadura and Andalucía, is the fourth most miserable and the fourth most wretched. Such a conclusion doesn't do much for all the paradise island guff. It also doesn't do much for the poor who are about to be slammed with a rise in the cost of living because of the increase in IVA. To put this rise in some sort of context, it is estimated that it will cost each household a bit over 700 euros more a year. This in a country where the minimum salary is under 700 (it is in fact around 640 euros per month).
The poverty statistics for the Balearics are bad enough, but if you take them for Spain as a whole, then they are even worse. Spain has the highest index of poverty in the whole of the European Union. And this is a country that is meant to be among the world's richest countries, if only determined by IMF figures for GDP. Yet it isn't surprising. I drew a comparison yesterday with the French minimum salary. This comparison, and comparisons with other European countries, together with their respective general rates of value added tax, are being widely made. There is a very good reason why. Rajoy in his address on Black Wednesday had the brass neck to say that the French rate of VAT was higher than Spain's. Yes, it is, but it won't be once the 21% rate comes in, but more pertinent is the comparative level of income. It is typical for politicians to be economic with their facts, and Rajoy is certainly no different.
The misery and additional poverty that the Spanish Government is about to inflict on the Balearics (and the nation) are not matched by the demeanour of these politicians. The PSOE party locally has gone on Facebook to show a photo of an Italian politician in tears when the announcement had to be made of cuts. It is compared with a truly abhorrent, horrible photo of Rajoy being applauded by members of his cabinet after his address on Wednesday. How dare they? They should hang their heads in shame. Italian politicians could empathise with the misery by being miserable. The Spanish ones can't. They are a disgrace.
In addition to the survey on poverty, another report has been issued. This one calculates that one in four people in the Balearics is at the risk of poverty, a figure that has risen by around 20,000 people in three years. And while this risk increases, the aid, what little there is because Spain isn't particularly generous anyway, is being cut. It is said that the cut to unemployment benefit, another element of the Black Wednesday announcement which Rajoy's cronies were so determined to applaud, will hit the Balearics harder than anywhere because of the dependence upon tourism and therefore the high level of seasonal employment (and unemployment).
The Balearics may not be the worst affected, but if not, this will be because either the Canaries or Andalucía is more affected. Two other regions with the highest levels of poverty, misery and wretchedness.
Yet, how can this all be, some will ask. The wonderful weather, the wonderful lifestyle, the wonderful people, the wonderful ... . Oh, do shut up. It is no coincidence that the Balearics, the Canaries and the region that is home to the Costa del Sol have such high levels of poverty. Each is dependent upon tourism and each employs people on low wages who are finding it increasingly difficult to even obtain employment contracts long enough to enable them to qualify for benefit.
The paradise island line is a facade, a statement of unreality. It is one trotted out by ignorant or smug expatriates who have not the faintest idea. Or one used by visitors who are similarly ignorant. They at least can be excused.
It is the facade, the superficiality of beach lifestyle, of the yacht club, of the golf club, of the doing lunch, of the doing dinner. It is one behind which many can shield themselves. Yet it is a facade that is showing signs of cracking. The Empire of the Sun on the paradise island may not be subject to anything as dramatic as an invasion force turning a world of smug aloofness and parties upside down, but the sun is lowering. It is not going down and never will, but no empire ever lasted.
Any comments to andrew@thealcudiaguide.com please.
Wednesday, July 04, 2012
Sponsored By TUI: Spanish tax policy
Who are the real powers in the lands? Prime Minister Rajoy and his government nationally, President Bauzá and his regional government in the Balearics, other presidents and other governments in other Spanish regions? The answer is none of these. Not if TUI wields its influence.
When TUI or the hotels speak, governments sit up and take note. When the European Union and the IMF urge the Spanish Government to bump up the rate of IVA (VAT), they neglect the fact that this is not a decision for the government. This, at any rate, is how one might style the opposition of TUI and the tourism sector to an increase in IVA that might see the current reduced rate for the tourism sector scrapped. If the government buckles under pressure from tour operators based in other countries, then the game is pretty much up; its impotence is revealed and its role is diminished. Welcome to the Kingdom of Spain, sponsored by TUI.
There is a sour deliciousness about a German company wishing to direct Spanish financial policy when the German Government is doing the same thing, albeit that the policies differ. Spain is now reduced to an argument between German commerce and German politics. What a strange world we live in.
TUI is threatening (and to say threat is not being hyperbolic) to reduce its operations in Spain if the rate of IVA goes up to 18%, the current general rate of IVA. Companies do from time to time issue certain "hints" to all sorts of governments if they don't do what they want them to. The British Government was once warned of the dire consequences of not joining the euro by Japanese car manufacturers. Mostly everyone seems to now have forgotten about this, as there were no dire consequences.
But then the Spanish tourism industry isn't quite like the British motor industry. It is the motor of the economy, as governments nationally and regionally keep reminding us, which the motor industry in Britain wasn't. Woe betide, therefore, any government that wants to get the economy motoring but which ignores the protests of a company so firmly in the driving-seat as TUI is.
TUI does have a point. Of course it does. And its point, though it isn't necessarily stating this, is that an economies, including that of the Balearics, with varying levels of dependence upon tourism cannot be revived if starved of the consumer's euro because of a rise in tax, and a whopping one at that in the case of the tourist rate going up from 8% to 18%.
It isn't just TUI which has a point. The Spanish hostelry federation has put the job losses that would result at 130,000 (9% of all those employed), the fall in consumption at up to 8%, and the loss to gross value added of 6,000 million euros. These losses would come on top of accumulated losses of 20% in the wider hostelry sector since economic crisis took hold.
The impact at the bar or restaurant coalface is not difficult to figure out. Whereas the previous one-point rise from 7% had little effect and could be swallowed by businesses if they wished to, a 10% rise couldn't be without harming even more the bottom line. For a dish costing five euros, for example, the price would increase by 50 cents. This may not sound a lot but multiply it by demand for meals out and then it starts to become so. Reduced spending by tourists is already a fact. Spending would be reduced further. And in Catalonia, where the tourist tax is due to be introduced, they must be having kittens at the thought of an IVA rise.
When you look at potential losses and when you hear the threats from the likes of TUI, you would have to think that the Spanish Government would need its head examining were it to go ahead. However, is it morally right that one sector, tourism, should be given special consideration when most of the rest of the economy isn't? The consumer has experienced increases in prices as it is and may well yet be faced with a rise in the general rate of IVA, thus compounding the effects of rising prices (petrol, gas, electricity, food etc.).
Whether morally right or not, the economic rightness of increasing IVA is being subject to ever more questioning. And so it should be. Austerity economics are being given a hard time because their chances of bringing about recovery or growth are extremely limited, certainly in the short to medium term. But austerity economics are being imposed on Spain, so indirect taxation bears the brunt, as does therefore the consumer. The question, where tourism is concerned, is who has the greater say. The austerity politicians of Europe or Europe's leading tour operator.
Any comments to andrew@thealcudiaguide.com please.
When TUI or the hotels speak, governments sit up and take note. When the European Union and the IMF urge the Spanish Government to bump up the rate of IVA (VAT), they neglect the fact that this is not a decision for the government. This, at any rate, is how one might style the opposition of TUI and the tourism sector to an increase in IVA that might see the current reduced rate for the tourism sector scrapped. If the government buckles under pressure from tour operators based in other countries, then the game is pretty much up; its impotence is revealed and its role is diminished. Welcome to the Kingdom of Spain, sponsored by TUI.
There is a sour deliciousness about a German company wishing to direct Spanish financial policy when the German Government is doing the same thing, albeit that the policies differ. Spain is now reduced to an argument between German commerce and German politics. What a strange world we live in.
TUI is threatening (and to say threat is not being hyperbolic) to reduce its operations in Spain if the rate of IVA goes up to 18%, the current general rate of IVA. Companies do from time to time issue certain "hints" to all sorts of governments if they don't do what they want them to. The British Government was once warned of the dire consequences of not joining the euro by Japanese car manufacturers. Mostly everyone seems to now have forgotten about this, as there were no dire consequences.
But then the Spanish tourism industry isn't quite like the British motor industry. It is the motor of the economy, as governments nationally and regionally keep reminding us, which the motor industry in Britain wasn't. Woe betide, therefore, any government that wants to get the economy motoring but which ignores the protests of a company so firmly in the driving-seat as TUI is.
TUI does have a point. Of course it does. And its point, though it isn't necessarily stating this, is that an economies, including that of the Balearics, with varying levels of dependence upon tourism cannot be revived if starved of the consumer's euro because of a rise in tax, and a whopping one at that in the case of the tourist rate going up from 8% to 18%.
It isn't just TUI which has a point. The Spanish hostelry federation has put the job losses that would result at 130,000 (9% of all those employed), the fall in consumption at up to 8%, and the loss to gross value added of 6,000 million euros. These losses would come on top of accumulated losses of 20% in the wider hostelry sector since economic crisis took hold.
The impact at the bar or restaurant coalface is not difficult to figure out. Whereas the previous one-point rise from 7% had little effect and could be swallowed by businesses if they wished to, a 10% rise couldn't be without harming even more the bottom line. For a dish costing five euros, for example, the price would increase by 50 cents. This may not sound a lot but multiply it by demand for meals out and then it starts to become so. Reduced spending by tourists is already a fact. Spending would be reduced further. And in Catalonia, where the tourist tax is due to be introduced, they must be having kittens at the thought of an IVA rise.
When you look at potential losses and when you hear the threats from the likes of TUI, you would have to think that the Spanish Government would need its head examining were it to go ahead. However, is it morally right that one sector, tourism, should be given special consideration when most of the rest of the economy isn't? The consumer has experienced increases in prices as it is and may well yet be faced with a rise in the general rate of IVA, thus compounding the effects of rising prices (petrol, gas, electricity, food etc.).
Whether morally right or not, the economic rightness of increasing IVA is being subject to ever more questioning. And so it should be. Austerity economics are being given a hard time because their chances of bringing about recovery or growth are extremely limited, certainly in the short to medium term. But austerity economics are being imposed on Spain, so indirect taxation bears the brunt, as does therefore the consumer. The question, where tourism is concerned, is who has the greater say. The austerity politicians of Europe or Europe's leading tour operator.
Any comments to andrew@thealcudiaguide.com please.
Tuesday, July 03, 2012
MALLORCA TODAY - TUI issues threat over proposed IVA increase
TUI has indicated that it will revise its operations into Spain (i.e. reduce them) if the national government goes ahead with an increase in the rate of IVA (VAT) that would bring what is currently a reduced rate for the tourism sector of 8% in line with the general rate of 18%.
See more: Diario de Mallorca
See more: Diario de Mallorca
Sunday, January 01, 2012
The Pain In Spain 2012
Welcome to 2012. If you live and work in Mallorca, the good news is that you will be paying more income tax. A nice way to bring in the new year.
The announcement by the Spanish Government that income tax will rise is just one of a package of austerity measures. It shouldn't have come as a surprise, except that prior to the election Mariano Rajoy had implied that income tax wouldn't go up. Promises or statements can swiftly be reneged upon and can easily be justified by putting the blame on a situation left behind by the Zapatero administration that was worse than had been expected. It is a wholly disingenuous justification. Voters were idiots if they had really believed taxes wouldn't go up.
The government, in increasing income tax rather than IVA (VAT), argues that this will be less damaging to economic recovery. Who are they trying to kid? Fiscal measures, be they direct or indirect taxation increases, are harmful. At least with keeping direct taxation at the same level, there is theoretically more disposable income. The government's argument is fatuous.
A sensible measure that the government has taken in respect of IVA is not to reduce it for tourism businesses. Again, it is something of a broken promise, but it was a promise that was flawed. Tax receipts from IVA rose in 2011, thanks to a one per cent rise to 8% for tourism businesses. With prospects for tourism in 2012 bright and northern Africa still in turmoil, an IVA reduction would have been unnecessary and a mistake.
The government is faced with an enormous challenge. Of course it is, and it is being realistic in terms of the degree to which it can get the deficit down, but its measures will do little to stimulate recovery. IVA will be reduced for new-property purchase, which may help, but with credit in such short supply, it is mere tinkering.
Spain is pretty much back in recession and Mallorca and the Balearics are as well, despite what the regional government might think. The banks don't think the same and have said so. Tourism, for Mallorca, will be the saviour as it was in 2011, but the island's prospects are otherwise as bleak as they are for the country as a whole.
There must have been consternation in the corridors of Balearics political power when the news came through that central government intended not to extend financing to the islands (along with three other regions) as had been promised. Whether President Bauzá was on the phone to Rajoy demanding to know what was going on we don't know, but the central finance ministry issued a further announcement saying that there had been an error and that no agreement as to a finance cut (elimination in fact) had been arrived at. Again, who are they trying to kid? You don't just make a mistake when it comes to this sort of an announcement, or if you do, it doesn't say much for how joined up central government is.
The swiftness with which the mistake was admitted does suggest that some stern words were had. For Bauzá, so intimately linked to Rajoy, it was news he could have done without, as pressure starts to mount on him and dissent from within his own party increases, the result in part of the closeness both personally and in philosophy between Bauzá and Rajoy. The withdrawal of central finance would also, in all likelihood, have put the kibosh on certain projects in Mallorca; bad PR again for Bauzá who would find it extremely difficult to criticise his PP masters, having so slavishly been prepared to follow them.
Away from the budget, another announcement by central government has a distinct Mallorcan flavour, and that is the appointment of Isabel Borrego as tourism secretary of state. It had been expected that a Mallorcan would be appointed, even if Miquel Ramis had been the front-runner, but is Borrego's appointment as positive as Ramis' might have been? Ramis does have direct experience of tourism, where Borrego doesn't. The government says that this doesn't matter as Borrego's predecessor, Joan Mesquida, also didn't have direct experience. It's a weak argument to say the least.
Various organisations have been quick to support Borrego's appointment, but then they always are; it is known as being diplomatic. The most positive thing that is being said about Borrego is that her background in property and in law is an advantage. An advantage? What for exactly? Or for whom? One guess. Hotels. The worry is that Borrego will be inward-looking in addressing more arcane aspects of tourism, such as the application of various laws as they apply to the industry and to developments, rather than outward-looking in terms of marketing.
So, here we are at the start of 2012. It is going to be a rocky ride this year and unfortunately it hasn't started very encouragingly.
Any comments to andrew@thealcudiaguide.com please.
The announcement by the Spanish Government that income tax will rise is just one of a package of austerity measures. It shouldn't have come as a surprise, except that prior to the election Mariano Rajoy had implied that income tax wouldn't go up. Promises or statements can swiftly be reneged upon and can easily be justified by putting the blame on a situation left behind by the Zapatero administration that was worse than had been expected. It is a wholly disingenuous justification. Voters were idiots if they had really believed taxes wouldn't go up.
The government, in increasing income tax rather than IVA (VAT), argues that this will be less damaging to economic recovery. Who are they trying to kid? Fiscal measures, be they direct or indirect taxation increases, are harmful. At least with keeping direct taxation at the same level, there is theoretically more disposable income. The government's argument is fatuous.
A sensible measure that the government has taken in respect of IVA is not to reduce it for tourism businesses. Again, it is something of a broken promise, but it was a promise that was flawed. Tax receipts from IVA rose in 2011, thanks to a one per cent rise to 8% for tourism businesses. With prospects for tourism in 2012 bright and northern Africa still in turmoil, an IVA reduction would have been unnecessary and a mistake.
The government is faced with an enormous challenge. Of course it is, and it is being realistic in terms of the degree to which it can get the deficit down, but its measures will do little to stimulate recovery. IVA will be reduced for new-property purchase, which may help, but with credit in such short supply, it is mere tinkering.
Spain is pretty much back in recession and Mallorca and the Balearics are as well, despite what the regional government might think. The banks don't think the same and have said so. Tourism, for Mallorca, will be the saviour as it was in 2011, but the island's prospects are otherwise as bleak as they are for the country as a whole.
There must have been consternation in the corridors of Balearics political power when the news came through that central government intended not to extend financing to the islands (along with three other regions) as had been promised. Whether President Bauzá was on the phone to Rajoy demanding to know what was going on we don't know, but the central finance ministry issued a further announcement saying that there had been an error and that no agreement as to a finance cut (elimination in fact) had been arrived at. Again, who are they trying to kid? You don't just make a mistake when it comes to this sort of an announcement, or if you do, it doesn't say much for how joined up central government is.
The swiftness with which the mistake was admitted does suggest that some stern words were had. For Bauzá, so intimately linked to Rajoy, it was news he could have done without, as pressure starts to mount on him and dissent from within his own party increases, the result in part of the closeness both personally and in philosophy between Bauzá and Rajoy. The withdrawal of central finance would also, in all likelihood, have put the kibosh on certain projects in Mallorca; bad PR again for Bauzá who would find it extremely difficult to criticise his PP masters, having so slavishly been prepared to follow them.
Away from the budget, another announcement by central government has a distinct Mallorcan flavour, and that is the appointment of Isabel Borrego as tourism secretary of state. It had been expected that a Mallorcan would be appointed, even if Miquel Ramis had been the front-runner, but is Borrego's appointment as positive as Ramis' might have been? Ramis does have direct experience of tourism, where Borrego doesn't. The government says that this doesn't matter as Borrego's predecessor, Joan Mesquida, also didn't have direct experience. It's a weak argument to say the least.
Various organisations have been quick to support Borrego's appointment, but then they always are; it is known as being diplomatic. The most positive thing that is being said about Borrego is that her background in property and in law is an advantage. An advantage? What for exactly? Or for whom? One guess. Hotels. The worry is that Borrego will be inward-looking in addressing more arcane aspects of tourism, such as the application of various laws as they apply to the industry and to developments, rather than outward-looking in terms of marketing.
So, here we are at the start of 2012. It is going to be a rocky ride this year and unfortunately it hasn't started very encouragingly.
Any comments to andrew@thealcudiaguide.com please.
Sunday, October 09, 2011
MALLORCA TODAY - Bauzá says IVA for the tourism sector will be reduced
Regional president José Bauzá has said that if the Partido Popular wins the national election on 20 November it will introduce a rate of IVA (VAT) that is "super-reduced". Much of the sector already enjoys a lower rate of IVA than the general rate (8% as opposed to 18%).
Wednesday, February 23, 2011
MALLORCA TODAY - Partido Popular would cut hotel IVA
José Ramón Bauzá, the leader of the Partido Popular in the Balearics, has said that if his party were to win the national elections in 2012, it would cut the rate of IVA (VAT), as it applies to hotels, from 8% to 4%. The rate of IVA for this sector went up on 1 July 2010 from 7%, while the general rate increased by two points to 18%.
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