Palma.—Balearic hotels have already sealed their contracts for 2013 with hotel rates rising by an average of four percent across the board.
But, all the negotiations were carried out and agreed before the government announced the two percent increase in IVA (VAT) in the tourist industry and this means that the hoteliers and the major British and German tour operators are going to have to renegotiate the contracts for the remainder of this year and next year.

Sources for the various hotel federations have more or less accepted that they are going to absorb much of the increase in VAT for this year although they do believe that there is a bit of leeway with the tour operators.

The increases in the VAT were announced recently by the Spanish Prime Minister, Mariano Rajoy, specifying that many items including cigarettes and clothing would be taxed by 21% instead of 18%. These increases have been introduced to help combat the country's mounting economic issues; however, it might harm tourism.

The leisure industry has typically been at a lower VAT rate; however, this will also be increased from 8% to 10%.
This rate will cover food and drink in hotels and restaurants, and holiday accommodation throughout the country.
Many of the tour operators and independent hotels are concerned about the new VAT cost, and are concerned that the average family will no longer be able to afford their annual holiday in Spain. And those who have already booked your hotel independently, you will find that the VAT increase will be added to the bill once VAT goes up on September 1.

Package holidays will not be affected at the moment, pending what the tour operators and the hoteliers can agree on at this late stage, those who have already booked will see no increase of the price.

However, items in the shops and eating out may be more expensive than in previous years, something which the tourist industry is worried about.
The Majorcan Hotel federation has complained again that the government has penalised the only industry in the country which is generating any income and jobs.

It is still trying to persuade the government to postpone any rise in VAT for the tourist industry until after the summer.

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