By Humphrey Carter PALMA

THE Balearic lobby for a cut in IVA (VAT) led by the Partido Popular's congresswoman Maria Salom, fell on deaf ears in Madrid yesterday with the Minister for Tourism, Industry and Commerce, Miguel Sebastian, ruling out a government u-turn over plans to increase IVA by two percent this summer.

The push for either a freeze or a reduction in IVA for the tourist industry has received cross party support here in the Balearics amidst fears that it will only cause the region's largest economy even more damage this summer, but Madrid was not for turning yesterday.

Sebastian denies that the IVA increase will hamper the tourist industry's capability to compete with the emerging and booming non Euro zone destinations.

He claimed that the Spanish tourist industry's problems is not caused by price and therefore a rise in IVA will not add to the sector's difficulties.
Salom proposed that the government agree to a reduction of IVA to just four percent for the tourist industry to off set similar moves taken by governments in other Euro zone countries to help their tourist industries but Sebastian maintains that considering Spain has one of the lowest rates of IVA in the Euro zone, no fiscal aid is necessary. “We're not facing a domestic price problem, our main problem lies overseas in our main client countries which have been hit by the recession and the proof is that, since these countries' economies have begun to show signs of recovery, the sale of holidays to Spain and the Balearics has increased,” Sebastian said yesterday.