Proposed hikes in VAT have caused an uproar in Mallorca and all across the Balearics recently. A government plan to hike VAT from 8% to 18% this Friday when the new budget is announced had led many spokespeople and workers within the tourism industry to complain, saying that tourism in Majorca and the other Balearic islands is one of the few industries that is proving financially sustainable.
Currently nearly two and a half thousand million Euros is generated by holiday makers coming to the Balearic islands of Ibiza, Mallorca, Menorca and Formentera, and some argued that a hike in VAT would make the islands unable to compete with countries like Greece who have promised to cut VAT on tourist industries. The Majorcan Federation of Hotels said that a 10% increase in tax would lead to a loss of more than one and a half million tourists a year and the closure of 700 businesses, costing 82 million Euros in revenue and nearly 21,000 jobs.
As well as warnings from the hotel industry, the central government in Madrid also had letters from travel companies. TUI, the largest tourism group in Europe, who run Crystal, Thompson and First Choice in the UK said that it would “revise it’s programme” in Spain if the proposed 10% increase in VAT went ahead.
The threat of the travel giant and the concerns of the hoteliers and workers within the tourist sector appear not to have fallen on deaf ears and yesterday after a meeting with Jose Ramon Bauza (the President of the Balearics), the minister for finance and public administration, Cristobal Montoro, said that the 10% increase in VAT would not happen this summer. However he did say that there would be a hike of 1 or 2% this Friday when the budget is announced.
What comes next will be hugely important to the fate of the tourist industry in the Balearics but with Spain facing tough austerity measures and hoping to secure €30,000 million from Europe to bail out her banks, the of the cries of the travel industry may go unheard.
http://www.seemallorca.com/events/news/vat-hikes-will-not-hit-mallorca-as-hard-as-feared.html
