A mountain of gold. From a distant land known as Madrid, Cristobel the Fairy Godfather waved his magic wand and a spell was cast that flew over the sea as though it were a burnishing trail left by a mythical airplane borne by the wings of angels. The spell touched the highest peaks of the blessed islands of the Balearics and burst like the most benign and glorious fireworks, gold cascading down the valleys, across the plains and to the waters of sapphires. Mont Oro, for it was he, Cristobel the Gold Mountain of All The Treasures of Hispania, spake unto the entranced peoples of the blessed isles. "You shall all go to the Ball (de Bot). You shall all forever more wear glass slippers rather than flip-flops." And the peoples were most grateful.
Well, in a parallel universe the people and politicians of the Balearics might indeed be grateful, but last week there were hordes of ingrates stomping their feet and demanding more. Cristóbal Montoro, Spain's finance minister, had been doing his annual sums. Some for them, some more for them, a bit less for them, and he plucked numbers out of the air and called them the allocations by regions of the state budget. Overlooking the small matter of an 87% increase in the allocation for the Balearics, far from everyone was happy, the discontent coming about because, regardless of this act of central government generosity, the Balearics will still get less per head of population from the national pot than mostly every other region of Spain.
Cheesed off various politicos and businesspeople might be by the miserly sum of 138.4 million euros, but they might remember that there was a time, not so long ago, when the Balearics did much more nicely thank you from the budget. in 2007, as an example, the allocation was 218 million euros, and if one goes back over the years, it will be discovered that, though the amount fluctuated, the Balearics usually did reasonably well. These budget allocations are for what are essentially strategic investments. The lion's share of the Balearics budget is for airports and ports with agriculture and the environment taking up most of the rest.
More investment could doubtless come in handy, but it has to be taken into account that there are eighteen other regions or communities holding out the begging bowl. One of them, Andalusia, despite it being a hotbed of socialism, regularly benefits from Madrid's largesse. It is a comparatively poor region. It is also big. Another, Catalonia (you might have heard of this region, it has been agitating for more for centuries), is also big. It isn't poor but last year it got clobbered by the Rajoy government. 25% down, something else which added to the Mas attack on the Constitution. In 2015, the budget will be up again, as indeed it will be in Galicia (the home region of Rajoy, oh and of Franco as well).
Politics probably do play a part in the budgets, but in truth these allocations are very small beer when compared with what the regions get through the redistribution of tax revenues. This is the principal source of the regions' finances, and it is something for which the Balearics have a very legitimate gripe. The people of the Balearics get back from Madrid around 300 million euros less than they put in.
Showing posts with label Tax revenues. Show all posts
Showing posts with label Tax revenues. Show all posts
Sunday, October 05, 2014
Tuesday, October 15, 2013
The New Model Regional Financing System
Instead, the focus has been on how to make the regions more financially efficient, and efficient financing is very much on the agenda at present, while the debate surrounding it may prompt a reconsideration of the nature rather than structure of regional government, making the regions more not less responsible for finance and creating what would be more a genuine financial and fiscal federal arrangement than the one which currently exists.
The Spanish Government has said that it will look at a reform of the present system of regional financing next summer. Certain regions, especially Madrid, want this brought forward; regional financing needs to be examined with greater urgency.
The financing of the regions is hardly a straightforward matter. The Aznar government tried to make it more straightforward in 2001 by introducing a reform which would have, it had hoped, stood for all time and taken away the regular, five-yearly rounds of negotiations which had only succeeded in generating political tensions. Almost from the moment the 2001 reform was introduced, it was apparent that it was unworkable. A weakness was to have assumed that one key factor in allocating national revenues to the regions - that of population increase - would be essentially evenly distributed. It was not, and the Balearics, by going through a boom in population, was a region which demonstrated just how uneven it could be.
The most recent reform was in 2009 by the Zapatero government. Under this reform the regions got more from the national tax revenue pot - 50% of income tax and IVA (VAT) for example. There were various funds set up, one of them called the Competitiveness Fund from which the Balearics has done quite well, and the system of equalisation between the regions was made more flexible and adjusted annually.
Though in theory all regions benefited to some extent from the 2009 reform, it was not without its critics. They focused on the political as much as the financial aspects of the reform, and politics have always played a part in how the regions' finances have been worked out. In 2009, the political criticism fell squarely on Catalonia. It had been pressing for a different financing arrangement and it got much of what it wanted, prompting attacks on the Zapatero administration for having in effect bought Catalonia's support.
The Catalonian dimension sours current opinion in several regions, especially those led by the Partido Popular and which make greater contributions to the overall revenue pot from which their finances are then redistributed. Madrid is one such region. The Balearics is another.
The starting-point for evaluating these finances is what the individual regions bring in from the tax-gathering function they perform for national government. In terms of tax capacity per head of population, Madrid stands in first position. Second is the Balearics; its tax raising per capita is three times greater than the region with the lowest capacity, the Canary Islands.
Based on 2010 figures, the Balearics had a tax capacity of 2,692 million euros. The final totting-up, which took into account different funds in addition to redistribution of income tax and IVA revenues, left the Balearics short by 300 million. Madrid was short by around 2,800 million. The issue of efficient financing centres, therefore, on what some regions believe to be unfair. They, in effect, subsidise other regions of Spain, and this has been an argument that Catalonia has long made as part of its claims for greater autonomy or even independence.
Regions like Madrid and the Balearics are politically very different to Catalonia and though they believed that they lost out to Catalonia under the 2009 reform (and still the system in operation), they have a similar gripe. It is because of this that the reform to be undertaken by the Spanish Government is seen as being potentially highly significant. Not only will it be political in addressing the vital issue of Catalonia's finances and so therefore the drive towards independence or not, it might just herald a move towards more of a fiscal federalist state, one in which, because it shouldn't be forgotten, there are two regions which operate in a totally different way to all the rest - Navarre and the Basque Country. They keep their tax revenues and hand over a percentage to national government. As such, they are not a part of the system of redistribution. Might they be the model for a new regional financing system?
Sunday, January 06, 2013
MALLORCA TODAY - Balearics raised more tax revenue in 2012 than anticipated
For once, a sign that things might (say might) be getting better. The Balearic Government raised more through tax revenues - thanks to tourism and property transfers involving the upper end of the market - than had been anticipated and this revenue has made the region one of the better performing parts of Spain.
See more: Ultima Hora
See more: Ultima Hora
Friday, October 09, 2009
Leader Of The Pack
And continuing what is likely to be theme of the month, the hotels and others have called upon President Antich to form an alliance with the heads of other regional governments across Spain, for which tourism is a vital part of their economies, in leading a lobby to get the central government to back track on the planned rise in IVA. In the report from the "Diario", the head of the hoteliers' federation in Mallorca is quoted as arguing that the IVA rise will be a worse move than the so-called eco-tax of some years ago, which was aborted almost as soon as it was introduced.
The strength of the opposition should not be underestimated and the argument against a rise is valid. However, it is also a case of special pleading. What about everyone else who is set to be affected by a two per cent rise on the top rate? Take away the one per cent for the tourism sector, and what might happen? Three per cent on the top rate?
The central government has to find money from somewhere. The alternative of course is cut public spending, but how? New funding is already in place for, for example, that investment finance for the hotels and additional assistance for those in need over the winter. A constant in the economic development of Spain during the boom years has been the role of public spending, especially for construction and civil engineering projects, and therefore for the construction industry, an industry neutered by the current lack of private finance from the banks. Without public spending in some parts of Spain, Mallorca for example, the economy would all but grind to a halt, save for tourism being bashed about by recession and now a possible tax increase.
The crisis, more than anything, has emphasised the underlying weakness of the Mallorcan economy and the short-sightedness of a model based on two key industries without a diversity to act as a safety net. There is an inevitability that taxes will need to rise, despite my assertion that a lowering might actually lead to increased revenues, and if not in the tourism sector then in the wider economy, resulting in shackles placed on consumer spending and thus a further limit to the capacity to come out of recession. In economics, recessions are often referred to with the aid of letters - a U is a fall, bumping along the bottom for a while and then coming up, a V is a sharp fall and then a sharp rise. Then there is a third - a W, two V's in other words. And that may indeed be the consequence of tax rises, a short-term recovery followed by another slump as consumers put their wallets away.
To other things, well, one other thing - the weather. The fortnight of storms that seemingly brought summer crashing to an end gave way, bang on 1 October, to a return to sun. It is extraordinary the number of times changes to the weather do seem to coincide with the first day of a new month. And the late summer weather has been remarkable. A temperature of 32 degrees has been registered in Sa Pobla, the weather station commonly used as the benchmark in the north, and meaning around 29 on the coast. Next week is forecast to see a drop to more normal temperatures of 22 to 23, and after that ... ? Hold on to your hats when November arrives.
QUIZ
Yesterday's title - Daft Punk, http://www.youtube.com/watch?v=lH-0s0pRleg. Today's title - iconic song, iconic group from the '60s.
(PLEASE REPLY TO andrew@thealcudiaguide.com AND NOT VIA THE COMMENTS THINGY HERE.)
The strength of the opposition should not be underestimated and the argument against a rise is valid. However, it is also a case of special pleading. What about everyone else who is set to be affected by a two per cent rise on the top rate? Take away the one per cent for the tourism sector, and what might happen? Three per cent on the top rate?
The central government has to find money from somewhere. The alternative of course is cut public spending, but how? New funding is already in place for, for example, that investment finance for the hotels and additional assistance for those in need over the winter. A constant in the economic development of Spain during the boom years has been the role of public spending, especially for construction and civil engineering projects, and therefore for the construction industry, an industry neutered by the current lack of private finance from the banks. Without public spending in some parts of Spain, Mallorca for example, the economy would all but grind to a halt, save for tourism being bashed about by recession and now a possible tax increase.
The crisis, more than anything, has emphasised the underlying weakness of the Mallorcan economy and the short-sightedness of a model based on two key industries without a diversity to act as a safety net. There is an inevitability that taxes will need to rise, despite my assertion that a lowering might actually lead to increased revenues, and if not in the tourism sector then in the wider economy, resulting in shackles placed on consumer spending and thus a further limit to the capacity to come out of recession. In economics, recessions are often referred to with the aid of letters - a U is a fall, bumping along the bottom for a while and then coming up, a V is a sharp fall and then a sharp rise. Then there is a third - a W, two V's in other words. And that may indeed be the consequence of tax rises, a short-term recovery followed by another slump as consumers put their wallets away.
To other things, well, one other thing - the weather. The fortnight of storms that seemingly brought summer crashing to an end gave way, bang on 1 October, to a return to sun. It is extraordinary the number of times changes to the weather do seem to coincide with the first day of a new month. And the late summer weather has been remarkable. A temperature of 32 degrees has been registered in Sa Pobla, the weather station commonly used as the benchmark in the north, and meaning around 29 on the coast. Next week is forecast to see a drop to more normal temperatures of 22 to 23, and after that ... ? Hold on to your hats when November arrives.
QUIZ
Yesterday's title - Daft Punk, http://www.youtube.com/watch?v=lH-0s0pRleg. Today's title - iconic song, iconic group from the '60s.
(PLEASE REPLY TO andrew@thealcudiaguide.com AND NOT VIA THE COMMENTS THINGY HERE.)
Thursday, October 08, 2009
One More Time
Following on from yesterday ... . The central government's tourism ministry reckons that an increase in IVA (VAT) of one per cent (to 8%) for certain tourism-related activities (accommodation, transport and bars/restaurants) will have no effect on the number of tourists. It also reckons, as noted in "The Diario", that the average price of a hotel stay (one night presumably) will rise by a mere 50 centimos as a consequence. The secretary of state for tourism believes that the fact that the rise will not be implemented until 1 July next year (as would be the case for all categories of IVA, including the general rate) will act as an incentive for bookings prior to this date. While true, it's also a tad disingenuous, a case of looking for a benefit from something essentially negative. The government is possibly on firmer ground when it points out that the hotel sector has been the beneficiary of a vast amount of investment finance, though to what extent this is actually being exploited one doesn't really know.
The date for the rise in IVA is probably not coincidental. It will kick in at the start of the third financial quarter in Spain - IVA inputs and outputs are calculated each quarter and payments or credits issued accordingly. The third quarter covers, of course, the peak months of July and August.
The wider point, though, is the drip-drip effect of a tax rise. With complaints about prices having been given a good old airing everywhere this summer, you can bet your life that once it becomes known that there is to be an increase, the forums and all the rest will be full of even more damning Mallorca's so expensive propaganda. One per cent, in the scheme of things, does not amount to much, but it does add to a cumulative perceptual impression of price rises. The tourism ministry, not least the local one in Mallorca, should be paying heed to those complaints. Indeed, the president of the regional government has expressed his concern about the planned rise.
The response by the central government to the criticisms of the tax rise from the boss of Thomas Cook suggests, at least in part, that it has been stung into making a statement, with its tourism ministry, headed by Joan Mesquida, himself a former director general of the Guardia Civil and National Police (interesting career progression, but there you go), to the fore in issuing this response. The suggestion that he, Mesquida, was actually seeking to keep the 7% rate - one that came from the Spanish tourism promotion organisation, Turespaña - has been rebutted. The party line, so to speak, is being held. But it speaks volumes that the intervention by the head of the second largest tour operator should provoke a response. The true power in the tourism market resides with the tour operators. The tourism ministry, as the frontline contact with the tour operators, should be seeking to distance itself from the argument and looking to keep the operators sweet, but of course it can't and is so backed into a corner, even if officials might actually agree with Thomas Cook. It will be interesting to hear what TUI, as the leading operator, might have to say about all this.
QUIZ
Yesterday's title - The splendidly-named chap from Thomas Cook made me think of Fontella Bass and Frankie Goes To Hollywood. Yes, I know I should get a life. Today's title - simply great; French house.
(PLEASE REPLY TO andrew@thealcudiaguide.com AND NOT VIA THE COMMENTS THINGY HERE.)
The date for the rise in IVA is probably not coincidental. It will kick in at the start of the third financial quarter in Spain - IVA inputs and outputs are calculated each quarter and payments or credits issued accordingly. The third quarter covers, of course, the peak months of July and August.
The wider point, though, is the drip-drip effect of a tax rise. With complaints about prices having been given a good old airing everywhere this summer, you can bet your life that once it becomes known that there is to be an increase, the forums and all the rest will be full of even more damning Mallorca's so expensive propaganda. One per cent, in the scheme of things, does not amount to much, but it does add to a cumulative perceptual impression of price rises. The tourism ministry, not least the local one in Mallorca, should be paying heed to those complaints. Indeed, the president of the regional government has expressed his concern about the planned rise.
The response by the central government to the criticisms of the tax rise from the boss of Thomas Cook suggests, at least in part, that it has been stung into making a statement, with its tourism ministry, headed by Joan Mesquida, himself a former director general of the Guardia Civil and National Police (interesting career progression, but there you go), to the fore in issuing this response. The suggestion that he, Mesquida, was actually seeking to keep the 7% rate - one that came from the Spanish tourism promotion organisation, Turespaña - has been rebutted. The party line, so to speak, is being held. But it speaks volumes that the intervention by the head of the second largest tour operator should provoke a response. The true power in the tourism market resides with the tour operators. The tourism ministry, as the frontline contact with the tour operators, should be seeking to distance itself from the argument and looking to keep the operators sweet, but of course it can't and is so backed into a corner, even if officials might actually agree with Thomas Cook. It will be interesting to hear what TUI, as the leading operator, might have to say about all this.
QUIZ
Yesterday's title - The splendidly-named chap from Thomas Cook made me think of Fontella Bass and Frankie Goes To Hollywood. Yes, I know I should get a life. Today's title - simply great; French house.
(PLEASE REPLY TO andrew@thealcudiaguide.com AND NOT VIA THE COMMENTS THINGY HERE.)
Wednesday, October 07, 2009
Here Comes A Fontella-Super Nova
When a bigwig from the world's second largest tour operator makes a pronouncement, the Mallorcan tourist authorities, hoteliers, town halls should all take note, and in the case of the tourism minister, it looked as though he had been made to - with some force. Manny Fontenla-Novoa, chief executive of Thomas Cook came, spoke and put a dirty great VAT cat among the pigeons of the regional and national governments. In addressing hoteliers in Palma, he was clear that proposals for rises in IVA (VAT) were, shall we say, less than advisable. Damn right they are.
Governmental coffers are less than flush at present. Spain has been one of the countries worst affected by recession, and will - in all likelihood - be one of the last to limp out of it. To remedy the deficits the government is running, they have come up with increasing indirect taxation (IVA/VAT) as the solution. Badly though revenue may be needed, this could well be counterproductive. As far as the tourism industry is concerned - bearing in mind that in other countries, such as France, there has been a reduction in VAT as it is specifically applied to tourism - any increase is bound to push up prices. These are not necessarily the prices of holidays, but those that would be charged in the bars and restaurants and so on. At a time when spending is falling and when one hears all those stories about high or higher prices, a VAT increase is the last thing that's needed. To add to this picture of woe, Thomas Cook are saying that the level of all-inclusive packages is set to rise next year, by a factor of 20%. That's a perfectly believable increase. Furthermore, as noted in "The Bulletin", Fontenla-Novoa has reserved some criticism for the promotional spend by the Balearics authorities. It is around 30 per cent of what Egypt, for example, dishes out. The comparison is not entirely fair as Egypt is a country; the Balearics are not, you may have noticed. But we get his point, even if also Egypt is diverting massive resources to establishing its place as a tourist destination. Yet of course in this regard there is a pretty fundamental issue. If tourism is so important not only to the Balearics and to Spain as a whole, why is not more promotion undertaken and why are measures adopted that positively have a negative effect on tourism, to which we must now add an increase in IVA?
From today in "Talk Of The North", you will be able to read a thing I have written about the season. One point I make is to question the tourism authorities' belief that the summer tourism model - the bread and butter of tourism - is working ok. It clearly is not, and recession and the pound are not the only factors. Thomas Cook would seem to agree, and rather pertinent, I felt, was a probably unintentional photo that "The Bulletin" had of those at this meeting in Palma. But it was terrific - in the centre, Fontenla-Novoa, a tall man with an easy smile and one suggesting just a hint of superiority or of having made his point, to one side of him the head of Iberostar looking ever more fabulously like a long grey-haired Red Indian, and to the other, shorter than the Thomas Cook boss, Miquel Nadal, tourism minister, with an expression as though he's just been given a severe ticking-off in the head's study but is required to pose for the school photo.
QUIZ
Yesterday's title - The Police, http://www.youtube.com/watch?v=gXU8kCrRHJY. Today's title - why and therefore who?
(PLEASE REPLY TO andrew@thealcudiaguide.com AND NOT VIA THE COMMENTS THINGY HERE.)
Governmental coffers are less than flush at present. Spain has been one of the countries worst affected by recession, and will - in all likelihood - be one of the last to limp out of it. To remedy the deficits the government is running, they have come up with increasing indirect taxation (IVA/VAT) as the solution. Badly though revenue may be needed, this could well be counterproductive. As far as the tourism industry is concerned - bearing in mind that in other countries, such as France, there has been a reduction in VAT as it is specifically applied to tourism - any increase is bound to push up prices. These are not necessarily the prices of holidays, but those that would be charged in the bars and restaurants and so on. At a time when spending is falling and when one hears all those stories about high or higher prices, a VAT increase is the last thing that's needed. To add to this picture of woe, Thomas Cook are saying that the level of all-inclusive packages is set to rise next year, by a factor of 20%. That's a perfectly believable increase. Furthermore, as noted in "The Bulletin", Fontenla-Novoa has reserved some criticism for the promotional spend by the Balearics authorities. It is around 30 per cent of what Egypt, for example, dishes out. The comparison is not entirely fair as Egypt is a country; the Balearics are not, you may have noticed. But we get his point, even if also Egypt is diverting massive resources to establishing its place as a tourist destination. Yet of course in this regard there is a pretty fundamental issue. If tourism is so important not only to the Balearics and to Spain as a whole, why is not more promotion undertaken and why are measures adopted that positively have a negative effect on tourism, to which we must now add an increase in IVA?
From today in "Talk Of The North", you will be able to read a thing I have written about the season. One point I make is to question the tourism authorities' belief that the summer tourism model - the bread and butter of tourism - is working ok. It clearly is not, and recession and the pound are not the only factors. Thomas Cook would seem to agree, and rather pertinent, I felt, was a probably unintentional photo that "The Bulletin" had of those at this meeting in Palma. But it was terrific - in the centre, Fontenla-Novoa, a tall man with an easy smile and one suggesting just a hint of superiority or of having made his point, to one side of him the head of Iberostar looking ever more fabulously like a long grey-haired Red Indian, and to the other, shorter than the Thomas Cook boss, Miquel Nadal, tourism minister, with an expression as though he's just been given a severe ticking-off in the head's study but is required to pose for the school photo.
QUIZ
Yesterday's title - The Police, http://www.youtube.com/watch?v=gXU8kCrRHJY. Today's title - why and therefore who?
(PLEASE REPLY TO andrew@thealcudiaguide.com AND NOT VIA THE COMMENTS THINGY HERE.)
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