MUSCLE IN ON THE CATWALK

Joan Collins HOTELIERS of Majorca, Minorca, Ibiza and Formentera still owe 37.1 million euros of the controversial tourist tax to the Balearic Ministry for Economy and Taxation, three years after the much criticised tax was scrapped and courts rejected the hoteliers' appeals. This represents 46 percent of the total (82'244'483 euros) amount due from the “tourist tax” (in which each tourist had to pay a one-euro-a-day tax). The tax was in force, from May 1 2002 until October 2003. Many hoteliers elected not to charge the tax hoping that it would be ruled illegal by the courts. In the end this did not prove to be case and much of the money owed will have to come from hotelier's pockets. The tax, which was introduced by the previous Balearic Government, was scrapped by the present Government in October 2003, after it came to office. The director general of the Tax department, Jorge Sainz de Baranda, said that since the court ruling in March of this year, “there has been an increase in requests from hoteliers to defer their payment. Companies can request this, the maximum period being three years, in spite of the fact that they have to pay a “delay” interest of five percent per year. “Those who still choose not to pay or guarantee payment through their bank have to pay 25 percent more because they have chosen this formula”. The tax department confirmed that, in spite of the appeals which have been lodged, they will strictly apply the “delay” interest laid down every year by the State Law of General Budgets. At the moment this interest varies between 4.5 and 5.5 percent. The court ruling dismissed all the arguments used by the hotel associations of Majorca, Minorca, Ibiza and Formentera to appeal against the payment of the tax. The court said in its ruling “from the point of view of items which are subject to both VAT and the tourist tax, we cannot agree with the “double imposition” of which they (the hoteliers) are complaining, as the objective and subjective elements of the taxable item are different”. The ruling added that the “tourist tax did not seek to encumber the services given by tourist accommodation establishments, or the renting out of rooms, but only aimed at targeting the financial capacity of tourists who visit the islands”. After the ruling, hotel owners and chains began to renegotiate the payment of the tax with the Balearic Government. Hotel chains have opted for payment by instalments. The “tourist tax” was approved by the last Balearic Government to raise money for the improvement and refurbishment of tourist areas, as well at to preserve the environment and the cultural heritage.