Palma.—The newspapers made grim reading yesterday as we also spelt out exactly what the latest set of austerity measures in Spain means.
However, apart from measures like civil servants losing their Christmas bonuses, councils being trimmed, aid for the unemployed being slimmed down and Ministerial budgets will be cut by 600 million euros this year, the killer blow is going to be another increase in VAT.

At the top end, VAT will be hiked from 18 to 21 percent while at the lower end, in the tourist industry for example, the increase will be from eight to ten percent.

But the reaction from the tourist industry was of desperation.
Exceltur, the alliance for tourism excellence, warned that the two percent hike will lead to a 1.5 percent contraction in tourism revenue this year.
Based on the current market performance, Exceltur has forecast that the industry will end this year 06 percent down on last year but, with a VAT hike coming in the middle of the summer, the net result come the end of the year could be much worse. “If we (tourism) are the driving force of the Spanish economy and the only sector capable of dragging Spain out of recession, then why has the government punished us instead of trying to help us,” the vice president of Exceltur, Jose Luis Zoreda said yesterday.

Exceltur has urged the government to delay any increase in VAT for the tourist industry until at least October or even January.
Zoreda warned that the two percent increase will translate into a 2'000 million euro loss for the country's tourist industry and, if the hike comes in as of immediate effect, then the industry will lose 103 million euros on the package holidays it has already sold at pre-VAT increased prices.

That said, Zoreda is confident that foreign tourism should perform as well as last year, especially in the Balearics and the Canaries but he fears that the domestic industry, such as coach companies, railways and travel agents, will suffer because Spaniards will holiday at home. He hinted that domestic flights bookings could also take a tumble.

Nautical industry
And, the Majorcan Hotel Federation (FEHM) backed him up claiming that the VAT increase will have a worse affect on the region's tourist industry than the controversial tourist tax.

Federation president Inmaculada de Benito repeated that some 4'000 jobs and 100 businesses now face uncertain future.
But, it is not just traditional tourism which is going to be hit. The nautical industry is also braced for a down turn in business. With the discriminatory matriculation tax still being charged, once VAT goes up, anyone purchasing a boat over eight metres in length will have to pay 33 percent in taxes and VAT.

One source for the nautical industry said that business is obviously going to slow down further once VAT has been increased.
Yesterday, civil servants mounted protests outside government buildings across the capital and the tension on the streets is expected to rise over coming days.


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