Tourist tax will cost local economy millions

The tourist tax will cost the Balearic economy 105'190 million pesetas per year if the Balearic government goes ahead with its plan to introduce the controversial levy next year. According to an economic impact study on the tax carried out by Ernst & Young for the Majorcan Hotel Federation, demand for holiday accommodation in the Balearics will drop by five percent which, when transformed into “bed nights,” means that the region's accommodation sector will be 4.2 million short. The Balearic government claims that the tax, which will vary between 0.25 and two Euros per day per hotel guest, will raise 12'551 million pesetas per year for the improvement and protection of the environment. But according to the conclusion to the impact study, the tax will have a “direct effect” on losses and hotel bookings. The study looked at the effects the levy will have on three-star hotels, as in accordance with the government's current design for the project, the tax will be collected in hotels as no other commercial or tourist sector wants to be involved with the levy. The collection of the tax at three-star hotels will reduce net profits per 100 pesetas by 10.73 pesetas, 10.04 pesetas and 14.86 pesetas in Majorca, Minorca and Ibiza/Formentera respectively. The Hotel Federation yesterday reminded the government during the presentation of the study that the tourist industry accounts for 85 percent of the region's economy with the remaining 15 percent being covered by other sectors “at a stretch.”