The tourist tax doesn't affect competitiveness. This is what Iago Negueruela said earlier this week in the context of the suggestion that the tax should be suspended as a measure to assist in the reactivation of tourism, whenever this may be.
As no great supporter of the tax, I would like to take issue with the minister for the economic model, tourism and employment. But I cannot, as the extent to which the tax has been responsible for a decline in tourist numbers (pre-virus crisis, obviously) cannot be proven. A contributory factor, yes, but there have been others - the renewed competition from other destinations, prices in the Balearics, shaky economies; all those things that we were so used to hearing about before the virus intervened.
Moreover, when he speaks about competitiveness, Negueruela is as interested in the number of jobs and the level of tourist spending as he is with the number of tourists. There were increases in employment and spending, while a general downward trend in tourist numbers represented something of a readjustment to what they had been prior to the "boom" created by the security fears in Turkey and north Africa. With the employment, there were still huge numbers of workers on temporary contracts, but there was also an increase in permanent employment and in salaries, courtesy of collective bargaining agreements.
All in all, therefore, Negueruela was probably right in saying what he did about competitiveness. However, he was referring to a situation when normal rules applied. They no longer do, as he knows perfectly well. Which was why, when he wasn't addressing competitiveness in terms of the tourist tax, he was issuing a demand to the Spanish government to "remove elements of distortions to competitiveness".
The tourism quest this summer will be for the national tourist. Negueruela was therefore pointing out, as if we were unaware of this fact, that the cost of flying is a factor which works in the favour of other regions - those on the mainland to which it isn't necessary to fly. There are motorways and there is the AVE high-speed train, paid for at "enormous cost by the state", as the minister stressed. The Spanish government should therefore be addressing the competitiveness distortions through, for example, Aena's air taxes. There should also be, he argued, "exhaustive price controls".
The minister was echoing calls from business associations such as the Pimem small to medium-sized businesses federation, which wants a suspension of air taxes and also wants flights for a standard 30 euros fare. There has also been the proposal that the 75% residents' discount is extended to people from the mainland.
Specifically on air taxes, Negueruela was seeking their suspension while in virtually the same breath he averred that the tourist tax doesn't affect competitiveness. The manner in which these taxes are applied obviously differs, but they have the same end-result - charges to travellers. Because of the virus, apart from anxieties about travel, there is going to be heightened price sensitivity as a result of loss of earnings. Hence, the minister argues the case for price controls. But it seems as if he wants his competitiveness cake and eat it. On the one hand, aware of the cost of travel, he wants an abandonment of air taxes. On the other, he doesn't appear to be minded to suspend the tourist tax. Contradictory? I would suggest that it is.
The Balearic government will clearly be seeking to derive every possible ounce of revenue that it can. But how much does it seriously believe can be generated through the tourist tax, certainly this year and quite probably next year as well? There have to be incentives to travel, so that businesses and ultimately the government can generate revenues through other means. These incentives surely have to include the tourist tax.
There are distortions to competitiveness, and the virus represents the biggest distortion of the lot. As many distortions as possible need eliminating or reducing. The tourist tax is one of them.
Coming to the proposal for extending the 75% discount, Negueruela observed that the legality of this would need to be studied. With the discount for residents of the Balearics (also the Canaries, Ceuta and Melilla), there is legality under European Union rules. It is a government subsidy for flights (and ferries), which is otherwise not permitted, and when the EU sniffs the existence of any illicit subsidies, it acts. The residents' discount falls outside the competition regulations. Applying it to people resident on the mainland probably would not.
The possibility of extending the discount does, I would argue, raise a potentially important issue for the EU. In pursuing economic recovery - travel and tourism being key elements in this - should it be looking at a modification of rules regarding subsidies? The Balearics and Spain, as with other traditional holiday destinations within the EU, suffer a competitive disadvantage from those countries outside the EU, notably Turkey, Egypt and Tunisia, whose governments provide various subsidies. It may only be a short-term modification, but it could well be something worthy of consideration.