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 VAT. Show all posts
Showing posts with label VAT. Show all posts
Saturday, April 09, 2016
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.
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.
Tuesday, August 21, 2012
MALLORCA TODAY - Parents try to beat IVA increase
While much of the talk about the rise in IVA (VAT) from 1 September has concentrated on the tourist industry and those businesses which will have IVA rates rise from a reduced 8% to 21%, spare a thought for parents who will have to buy material for the new school year that will now have a rate of 21% whereas it was only 4%. Consequently, parents are buying early to beat the rise.
See more: Ultima Hora
See more: Ultima Hora
Tuesday, July 17, 2012
MALLORCA TODAY - Tourist sector to apply pressure over VAT rise
Though discussions have begun between hotels and tour operators as to the implementation of the 2% rise (to 10%) of the reduced rate of IVA (VAT) in the tourist sector, the hotels and other businesses in the sector are not accepting the rise without a fight. They are to meet Balearics president Bauzá and may also seek a meeting with Prime Minister Rajoy.
See more: Diario de Mallorca
See more: Diario de Mallorca
Thursday, July 12, 2012
Black Wednesday: The Spanish VAT increase
I realise that it is an unlikely scenario, but were Mariano Rajoy to come to your front door brandishing an invoice, what would you say to him? And be careful, because if you insult him, you might find that he scurries off and does you for impugning his honour, in the style of the Balearics El Presidente Bauzá ("inútil", "fascista", etc, in the words of union boss and serial insulter Lorenzo Bravo).
For a kick off, you would probably say that the IVA (VAT) he's charging you is going to have to be 18%. "You can date the invoice for before the increase comes in, Mariano (Sunday or Monday). That way, you can make it 18% and not 21%." "Yes, but there's the European Union and the IMF to satisfy. It's got to be later and at 21%." "Sorry, Mariano, either you make it 18% or you can bugger off."
There will be an awful lot of Marianos who discover that whatever invoices they should be raising for this quarter are suddenly being dated in the first week or so of July. Which assumes, of course, that IVA is even being applied; a big assumption. And the assumption will be even greater once the increase comes in. Three more points of IVA to pay. You've got to be joking.
But more fundamentally, the invoice that Mariano comes to the door with would not need IVA being applied. Not because it's being done black, whatever it is, but because there wouldn't be anything in the column for the base amount. You can't charge IVA, be it 18 or 21%, on zero. And zero, which is being generous, is about all that Rajoy's efforts since coming into office are worth.
Poor old Rajoy, you wouldn't wish his problems on your worst enemy, though worst enemy is precisely what Rajoy has become for many people. To the reprehensible and economically dubious use of taxation that isn't progressive, a move designed to lose him even more of his rapidly dwindling number of friends, he has the miners protesting in Madrid, the public workers unions threatening strikes as early as this month and all the other unions looking forward to yet another general strike.
To make things really ducky for Rajoy, he has the Europeans telling him that the Bank of Spain should be granted far more powers. There would be one bright note if this were to happen. He could get rid of at least one of the various of his ministers who seem to all do the same financial/economic/make-numbers-up tasks. As he's getting rid of other bodies in the public service, he may as well shed a minister or several. No one would notice, much as they wouldn't notice if Rajoy were to suddenly disappear in a puff of smoke left behind by the economics of slash and burn.
On top of all this little lot, Rajoy has to contend with the fury of the tourism sector. Let's just remind ourselves, shall we. Which political party, before the last national election, promised to cut the tourist rate of IVA? It wasn't PSOE, so it must have been ... . So it was. It was the Partido Popular and a prime minister who also made a pledge to tackle unemployment. And what better way to do this than hit consumers harder, meaning less of the disposable and therefore less spend, less business and fewer jobs. Or what better way than to load a greater tax burden on the so-called motor of the economy, the tourism sector, thus meaning higher prices, less spend, less business and fewer jobs. (I may question the morality of there being a reduced rate for the tourism sector when mostly everyone else is being slammed with 21%, but in the absence of any other signs of life in the economy, it is just about justifiable.) What better way than to increase IVA in a nation where the minimum salary is half of that in France, so meaning less spend, less business and fewer jobs.
Poor old Rajoy. His apologists will argue that he was sold a complete pup when he became prime minister. It is no argument. He wanted the job, but he should have come clean and said that there was precious little that he could actually do. Except bowing to the demands of the EU.
Originally, it was said the IVA increase would happen tomorrow, Friday the thirteenth. But don't worry about walking under ladders or black cats crossing your paths, because the 21% ton weight is going to fall from the ladder onto you anyway and the cat's about to piss on you. What an absolute bloody mess.
Any comments to andrew@thealcudiaguide.com please.
For a kick off, you would probably say that the IVA (VAT) he's charging you is going to have to be 18%. "You can date the invoice for before the increase comes in, Mariano (Sunday or Monday). That way, you can make it 18% and not 21%." "Yes, but there's the European Union and the IMF to satisfy. It's got to be later and at 21%." "Sorry, Mariano, either you make it 18% or you can bugger off."
There will be an awful lot of Marianos who discover that whatever invoices they should be raising for this quarter are suddenly being dated in the first week or so of July. Which assumes, of course, that IVA is even being applied; a big assumption. And the assumption will be even greater once the increase comes in. Three more points of IVA to pay. You've got to be joking.
But more fundamentally, the invoice that Mariano comes to the door with would not need IVA being applied. Not because it's being done black, whatever it is, but because there wouldn't be anything in the column for the base amount. You can't charge IVA, be it 18 or 21%, on zero. And zero, which is being generous, is about all that Rajoy's efforts since coming into office are worth.
Poor old Rajoy, you wouldn't wish his problems on your worst enemy, though worst enemy is precisely what Rajoy has become for many people. To the reprehensible and economically dubious use of taxation that isn't progressive, a move designed to lose him even more of his rapidly dwindling number of friends, he has the miners protesting in Madrid, the public workers unions threatening strikes as early as this month and all the other unions looking forward to yet another general strike.
To make things really ducky for Rajoy, he has the Europeans telling him that the Bank of Spain should be granted far more powers. There would be one bright note if this were to happen. He could get rid of at least one of the various of his ministers who seem to all do the same financial/economic/make-numbers-up tasks. As he's getting rid of other bodies in the public service, he may as well shed a minister or several. No one would notice, much as they wouldn't notice if Rajoy were to suddenly disappear in a puff of smoke left behind by the economics of slash and burn.
On top of all this little lot, Rajoy has to contend with the fury of the tourism sector. Let's just remind ourselves, shall we. Which political party, before the last national election, promised to cut the tourist rate of IVA? It wasn't PSOE, so it must have been ... . So it was. It was the Partido Popular and a prime minister who also made a pledge to tackle unemployment. And what better way to do this than hit consumers harder, meaning less of the disposable and therefore less spend, less business and fewer jobs. Or what better way than to load a greater tax burden on the so-called motor of the economy, the tourism sector, thus meaning higher prices, less spend, less business and fewer jobs. (I may question the morality of there being a reduced rate for the tourism sector when mostly everyone else is being slammed with 21%, but in the absence of any other signs of life in the economy, it is just about justifiable.) What better way than to increase IVA in a nation where the minimum salary is half of that in France, so meaning less spend, less business and fewer jobs.
Poor old Rajoy. His apologists will argue that he was sold a complete pup when he became prime minister. It is no argument. He wanted the job, but he should have come clean and said that there was precious little that he could actually do. Except bowing to the demands of the EU.
Originally, it was said the IVA increase would happen tomorrow, Friday the thirteenth. But don't worry about walking under ladders or black cats crossing your paths, because the 21% ton weight is going to fall from the ladder onto you anyway and the cat's about to piss on you. What an absolute bloody mess.
Any comments to andrew@thealcudiaguide.com please.
Wednesday, July 11, 2012
MALLORCA TODAY - General rate of IVA in Spain to increase to 21%
Mariano Rajoy has announced the latest round of austerity measures. The general rate of IVA (VAT) is set to rise to 21% from 18%, while the reduced rate for the likes of tourist services will increase from 8% to 10%. The lowest rate for basic necessities (though this does include newspapers) will stay at 4%.
The increases in IVA will come into effect on Friday, 13 July*.
Other measures include a rise in tobacco duty, the elimination of Christmas bonuses for public employees and the scrapping of the deduction on property purchase.
Reactions to the measures: The main unions are looking at calling another general strike. The hotels in the Balearics have called the rise in IVA to 10% a "lethal error". President Bauzá in the Balearics has described the measures as being essential.
* Now being said that the increases will come in on Sunday, 15 or Monday, 16 July.
The increases in IVA will come into effect on Friday, 13 July*.
Other measures include a rise in tobacco duty, the elimination of Christmas bonuses for public employees and the scrapping of the deduction on property purchase.
Reactions to the measures: The main unions are looking at calling another general strike. The hotels in the Balearics have called the rise in IVA to 10% a "lethal error". President Bauzá in the Balearics has described the measures as being essential.
* Now being said that the increases will come in on Sunday, 15 or Monday, 16 July.
Monday, July 09, 2012
MALLORCA TODAY - Bauzá says there will be no increase in tourist IVA rate
Following a meeting with Cristóbal Montoro, the national government treasury minister, Balearics President José Ramón Bauzá says that there will be no increase in the tourist rate of IVA (VAT) from 8%.
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
Tuesday, June 26, 2012
MALLORCA TODAY - Consternation in the tourism sector at possible rise in IVA
A further rise in IVA (VAT) looks likely, given the recommendations of the European Union to the Spanish Government. But the tourism sector is greatly concerned that the current reduced rate of 8% for the sector (against 18% generally) could be scrapped and that it would end up with the same rate. Representations have been made to the national tourism minister Jose Manuel Soria, following rumours that such a rise might occur and might occur as early as next month. It might be remembered that the tourism sector had hoped for a further reduction in IVA when the Partido Popular government took office and that sources within the PP had indeed suggested this might happen.
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%).
Thursday, January 21, 2010
Smokey And The Banned-It: Part Two
Following up on yesterday's piece about the smoking ban, the local health minister has dismissed - as you might expect - the idea that this will lead to "total ruination" of the bar and restaurant sector. She has also sought to remind everyone that the ban is part of a wider European Union-inspired drive to enforce total prohibition in public places in all countries by 2012. When all else fails in the winning of hearts and minds, blame it all on Brussels. She has also been at pains to point out that more stringent enforcement has been applied elsewhere, such as in the UK, so that's alright then; it's all a question of degree. Where she has more justification is in pointing out that a ban has not proved to be particularly harmful in Italy, another grand smoking country, and though the measure has proved to have popular support in Italy, she might have added that Italian bar owners have been adept at finding the odd loophole. Without naming them, she says that bans have resulted in increased numbers of customers in some countries. It might be interesting to know which ones.
As always, it comes down to how politicians want to spin the issue. Sra. Buades (the health minister) has not seemingly referred to the Croatian backtracking or to the lack of enforcement in Greece, but despite all this, one can pretty much safely assume that the ban in Spain, and therefore Mallorca, will go ahead, albeit that no date has been set.
On this topic, my thanks to Dave for drawing attention to the harmful impact of the smoking bans on country pubs in Scotland. He calls for "more freedom to choose, less proscription". Amen to that, whatever the cause, only problem being, Dave, that Europe ain't going to let there be a choice.
IVA and tourism
The Spanish Government has been getting it in the neck again about the decision to increase IVA (VAT). At the annual leaders in tourism forum in Madrid, staged by the hotel and tourism association Exceltur, the president of this association has stated that the increase is a mistake. Almost no-one seems to think it is a good idea, especially as tourism in other countries has been treated more kindly in having tax cuts. The president believes that the Government has not shown tourism the same consideration as it has other sectors of the economy. Elsewhere, there have been calls to bring the rate of IVA for tourism-related business down to 4%, which is the rate currently applied to newspapers.
At this forum, the great and good of the tourism world have been having their say as to the travails of the Spanish tourism industry. More is needed in terms of modernisation, there is over-supply etc, etc. None of it new in other words. And nothing concrete being offered either, unless you count the concrete that would go to improving infrastructures. One does have to wonder about these forums and conferences. Statements of the bleeding obvious but no obvious plans or suggestions.
Señor 80 Cents - Café Zapatero
And something else for the Spanish Government, specifically Sr. Zapatero. Recently, I discovered that he is widely referred to as Mr. Bean. I hadn't appreciated this to be the case, having myself dubbed him that on the day he first won the presidency. Physically, there is a resemblance, but it was his manner, when he won the election in 2004, more than appearance, that smacked of Rowan Atkinson's character. He hadn't been expected to win. As a consequence, he looked sheepish, awkward, perplexed and not a little bit like he was out of his depth. And a few months ago, he made what has been a celebrated gaffe. On Spanish TV, there is this thing called "I've Got A Question For You". President Zap was grilled by an audience, one member of this asking him to give the normal price of a coffee. 80 centimos came the response, accompanied by tittering in the audience. The youtube* of this finishes with the president saying "depende", i.e. it depends, which is true. Depends where, what type of coffee and so on. You could get a coffee for 80 cents, though it would be unusual. The Dunkin Donuts chain has now started its own 80 cent coffee, an "anti-crisis coffee", promoted with the help of a photo of a Zapatero double. Who could that be? Mr. Bean perhaps. And no, no jokes about coffee beans, please.
* http://www.youtube.com/watch?v=4382KyAnP-M
Any comments to andrew@thealcudiaguide.com please.
As always, it comes down to how politicians want to spin the issue. Sra. Buades (the health minister) has not seemingly referred to the Croatian backtracking or to the lack of enforcement in Greece, but despite all this, one can pretty much safely assume that the ban in Spain, and therefore Mallorca, will go ahead, albeit that no date has been set.
On this topic, my thanks to Dave for drawing attention to the harmful impact of the smoking bans on country pubs in Scotland. He calls for "more freedom to choose, less proscription". Amen to that, whatever the cause, only problem being, Dave, that Europe ain't going to let there be a choice.
IVA and tourism
The Spanish Government has been getting it in the neck again about the decision to increase IVA (VAT). At the annual leaders in tourism forum in Madrid, staged by the hotel and tourism association Exceltur, the president of this association has stated that the increase is a mistake. Almost no-one seems to think it is a good idea, especially as tourism in other countries has been treated more kindly in having tax cuts. The president believes that the Government has not shown tourism the same consideration as it has other sectors of the economy. Elsewhere, there have been calls to bring the rate of IVA for tourism-related business down to 4%, which is the rate currently applied to newspapers.
At this forum, the great and good of the tourism world have been having their say as to the travails of the Spanish tourism industry. More is needed in terms of modernisation, there is over-supply etc, etc. None of it new in other words. And nothing concrete being offered either, unless you count the concrete that would go to improving infrastructures. One does have to wonder about these forums and conferences. Statements of the bleeding obvious but no obvious plans or suggestions.
Señor 80 Cents - Café Zapatero
And something else for the Spanish Government, specifically Sr. Zapatero. Recently, I discovered that he is widely referred to as Mr. Bean. I hadn't appreciated this to be the case, having myself dubbed him that on the day he first won the presidency. Physically, there is a resemblance, but it was his manner, when he won the election in 2004, more than appearance, that smacked of Rowan Atkinson's character. He hadn't been expected to win. As a consequence, he looked sheepish, awkward, perplexed and not a little bit like he was out of his depth. And a few months ago, he made what has been a celebrated gaffe. On Spanish TV, there is this thing called "I've Got A Question For You". President Zap was grilled by an audience, one member of this asking him to give the normal price of a coffee. 80 centimos came the response, accompanied by tittering in the audience. The youtube* of this finishes with the president saying "depende", i.e. it depends, which is true. Depends where, what type of coffee and so on. You could get a coffee for 80 cents, though it would be unusual. The Dunkin Donuts chain has now started its own 80 cent coffee, an "anti-crisis coffee", promoted with the help of a photo of a Zapatero double. Who could that be? Mr. Bean perhaps. And no, no jokes about coffee beans, please.
* http://www.youtube.com/watch?v=4382KyAnP-M
Any comments to andrew@thealcudiaguide.com please.
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.)
Thursday, November 27, 2008
Give Me A Reason
A thought-provoking moment from the "Majorca Daily Bulletin" yesterday. Well, it provoked my thoughts; I can't speak about others. On the tourism front, a professor in Barcelona is saying that, while the top and bottom ends of the market should be fine next season, the middle market is more likely to shrink. He explains this by comparing tourism with the situation in the car sector where mid-range car sales have fallen but the top end is still growing.
It's an interesting comparison, but I'm not entirely sure I agree. Intuitively, one would anticipate that anything other than the top end would decline next year, but there are plenty of messages floating around that suggest otherwise. Firstly, that bottom end. One has to be careful as to definition, but locally (in Alcúdia at any rate) it seemed that this year it was the very economic market, typified by the exclusive all-inclusives, that was taking a hit. I'm not sure that Bellevue, only a third or so of it all-inclusive, had a particularly brilliant season either. Yet some other hotels in the same area that were offering half board or self-catering were doing fine thanks very much. Ok, that this was this year, but there is a general feeling that, despite the economic problems, people will still fork out for their annual holiday. The car analogy may not be that appropriate, as the purchase of a new car is something that can be deferred. So, you might say, could a holiday, but there is perhaps less rationality when it comes to buying holidays or not.
There was, though, the evidence in August of hotels that were making special offers; hotels like Molins in Cala San Vicente or the Daina in Puerto Pollensa. I guess you would define these hotels as catering for the middle market, but again one has to be careful with one's classifications. Alcúdia, it might be said, has a strong lower middle-market presence than does Puerto Pollensa, but that lower middle-market is not the budget end, which the professor is saying is one that is likely to grow. From what I understand, bookings within this market for 2009 are pretty good. Right down at the budget end of the market, let's be blunt, the contribution to the wider economy is relatively small, especially if much of this market heads to an all-inclusive. The crucial factor for next year, especially where the British market is concerned, could well be the state of the pound, and the exchange rate against the euro could yet get worse. If the Brit holidaymaker does decide to go ahead with his fortnight in Mallorca and Euroland, there must be some concern as to spend, more so than has been the case over the past two to three years.
One hears calls for bars and restaurants to take account of the exchange rate and to price accordingly. It's all well and good, but why should they? Indeed, how can they? Owners may be well aware of the sinking pound, but they are also aware of their own costs. It would surprise me if one were to find significant price hikes next season, but it would surprise me even more if there were to be reductions. This said, if the Brit holidaymaker has yet to decide on his destination for next year, that exchange rate could yet become the loser in the penalty shoot-out between Mallorca and the likes of Turkey or Croatia.
There is now also the issue of VAT. The two and a half per cent reduction may be designed to stimulate consumer spending, but will it make much of a difference to the holiday decision-making purchase? On a two thousand pound holiday, the element for VAT means that, net, the holiday actually costs a bit over 1700 pounds. With a reduction, the final cost would now make the holiday some 40-odd quid cheaper. An incentive? It would be questionable even if it were true. The VAT calculation is far more complicated than I have just outlined, owing to factors such as the tour operators margin scheme (and don't ask me to try and explain that). If there is any reduction it will not even be in this range, and chances are that it wouldn't be passed on anyway. Forget it.
Nope, the real issue - that shoot-out decider - is the pound in your pocket, or rather the pound in your pocket when it is removed and then presented in exchange for a euro. The problem is that you might get just a euro, or even less. That would be worrying; if it went below one euro that could be the point at which the holidaymaker crosses the psychological barrier, and crosses off Mallorca from his list of destinations. But there again, rational though that might be to do so, who said that the holiday decision was solely a reasoned one; the holidaymaker needs to be given little reason to have that holiday and in Mallorca, despite the state of the pound. The middle market may not grow next year, but it may also not fall. Or am I being irrational in believing so.
QUIZ
Yesterday's title - Kaiser Chiefs, "Ruby" (http://www.youtube.com/watch?v=JMDcOViViNY). Today's title - oh, no apologies, it is Andrea after all. So therefore ...
(PLEASE REPLY TO andrew@thealcudiaguide.com AND NOT VIA THE COMMENTS THINGY HERE.)
It's an interesting comparison, but I'm not entirely sure I agree. Intuitively, one would anticipate that anything other than the top end would decline next year, but there are plenty of messages floating around that suggest otherwise. Firstly, that bottom end. One has to be careful as to definition, but locally (in Alcúdia at any rate) it seemed that this year it was the very economic market, typified by the exclusive all-inclusives, that was taking a hit. I'm not sure that Bellevue, only a third or so of it all-inclusive, had a particularly brilliant season either. Yet some other hotels in the same area that were offering half board or self-catering were doing fine thanks very much. Ok, that this was this year, but there is a general feeling that, despite the economic problems, people will still fork out for their annual holiday. The car analogy may not be that appropriate, as the purchase of a new car is something that can be deferred. So, you might say, could a holiday, but there is perhaps less rationality when it comes to buying holidays or not.
There was, though, the evidence in August of hotels that were making special offers; hotels like Molins in Cala San Vicente or the Daina in Puerto Pollensa. I guess you would define these hotels as catering for the middle market, but again one has to be careful with one's classifications. Alcúdia, it might be said, has a strong lower middle-market presence than does Puerto Pollensa, but that lower middle-market is not the budget end, which the professor is saying is one that is likely to grow. From what I understand, bookings within this market for 2009 are pretty good. Right down at the budget end of the market, let's be blunt, the contribution to the wider economy is relatively small, especially if much of this market heads to an all-inclusive. The crucial factor for next year, especially where the British market is concerned, could well be the state of the pound, and the exchange rate against the euro could yet get worse. If the Brit holidaymaker does decide to go ahead with his fortnight in Mallorca and Euroland, there must be some concern as to spend, more so than has been the case over the past two to three years.
One hears calls for bars and restaurants to take account of the exchange rate and to price accordingly. It's all well and good, but why should they? Indeed, how can they? Owners may be well aware of the sinking pound, but they are also aware of their own costs. It would surprise me if one were to find significant price hikes next season, but it would surprise me even more if there were to be reductions. This said, if the Brit holidaymaker has yet to decide on his destination for next year, that exchange rate could yet become the loser in the penalty shoot-out between Mallorca and the likes of Turkey or Croatia.
There is now also the issue of VAT. The two and a half per cent reduction may be designed to stimulate consumer spending, but will it make much of a difference to the holiday decision-making purchase? On a two thousand pound holiday, the element for VAT means that, net, the holiday actually costs a bit over 1700 pounds. With a reduction, the final cost would now make the holiday some 40-odd quid cheaper. An incentive? It would be questionable even if it were true. The VAT calculation is far more complicated than I have just outlined, owing to factors such as the tour operators margin scheme (and don't ask me to try and explain that). If there is any reduction it will not even be in this range, and chances are that it wouldn't be passed on anyway. Forget it.
Nope, the real issue - that shoot-out decider - is the pound in your pocket, or rather the pound in your pocket when it is removed and then presented in exchange for a euro. The problem is that you might get just a euro, or even less. That would be worrying; if it went below one euro that could be the point at which the holidaymaker crosses the psychological barrier, and crosses off Mallorca from his list of destinations. But there again, rational though that might be to do so, who said that the holiday decision was solely a reasoned one; the holidaymaker needs to be given little reason to have that holiday and in Mallorca, despite the state of the pound. The middle market may not grow next year, but it may also not fall. Or am I being irrational in believing so.
QUIZ
Yesterday's title - Kaiser Chiefs, "Ruby" (http://www.youtube.com/watch?v=JMDcOViViNY). Today's title - oh, no apologies, it is Andrea after all. So therefore ...
(PLEASE REPLY TO andrew@thealcudiaguide.com AND NOT VIA THE COMMENTS THINGY HERE.)
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