Five reasons to forget about the Tourist Tax

 

 

 

The tourist tax has been included in several electoral programs, despite the fact that there are several reasons to desist from its implementation; Below I list what I consider the five most important: 

 

(1) Pure electoralism: rate of 9 euros a day? 

 

The discourse of the tourist tax is not based on rational criteria, but on an “act of empathy” to capture social discontent due to various factors such as traffic congestion and housing rental prices, and project it onto tourism, which is where a part of the population wrongly identifies the origin of all their evils. That is to say, instead of the planner creating an adequate narrative about tourism that alleviates outbreaks of aversion to tourism, he goes and enhances them for electoral purposes. 

 

This is evident in the figure one of the promoting parties claims the tax will raise annually: 600 million euros . Previous debates on the tax discussed figures between 80 and 120 million euros per year. But what percentage of inflation has been applied to this figure?

 

Let's see what would need to be charged to tourists to raise those 600 million euros: with approximately 15 million tourists per year and an average stay of about 7 days, we're looking at around 100 million overnight stays (2022: 86,7 million overnight stays); this would result in a tax of approximately 6 euros per day. If we also consider that the unregistered accommodation sector doesn't pay the tax and that long stays have a maximum number of days for which payment is required (usually around 10 days), we would be looking at a minimum tax of 8-9 euros per day for each day of stay in regulated accommodation, which is outrageous, especially considering the following point:

 

 

 

 

(2) Inflationary context and other rates to come 

 

Last month, at ITB Berlin, German economist Clemens Fuest warned that Germans' travel budgets will decline starting in 2024. According to this expert, the "travel recovery effect" will still partially last through 2023, but from 2024 onward, " society will be poorer ." Similarly, José María Mañaricúa (president of the FEHT, the Spanish Federation of Hotel and Tourism Businesses) recently stated that "it seems we have already spent all our pandemic savings" (tourinews, April 18, 2023).

 

Added to this are the new travel restrictions coming in 2024. If the Canary Islands are not exempt at the last minute, the most notable changes would be the following: the end of the exemption for emissions certificates and the kerosene tax, which would be compounded from 2025 onwards by the increased cost of flights due to the progressive SAF fuel blend.

 

Therefore, the Canary Islands tourist tax would be situated within this context of the impoverishment of tourists and a clear upward trend in flight prices. All these inflationary effects contribute to the price, and beyond a certain point, they become discouraging regarding the intention to visit the Canary Islands, potentially leading to a significant reduction in our "critical mass" of tourists ( see: "The Coming Natural Selection" ).

 

(3) Discriminatory nature : the illegal offer does not pay

 

This is the most perverse thing. The clandestine offer has been registering impressive increases in recent years, favored by the lack of definitive regulation of vacation rentals and the lack of tourist inspection. The latest data from the Government of the Canary Islands from 2018 already counted 27% of the total accommodation offer as holiday homes, of which only 21% were legalized. The transfer to vacation rentals could even be further enhanced by the new housing law, leaving those who operate clandestinely outside the payment of the tax. Therefore, the rate would benefit those who operate "black" and would further increase the competitive advantage of the illegal bed. It would be the height of unfair competition.   

 

(4) A final tax?... I don't think so.

 

Experience in the Balearic Islands has shown that the government is incapable of reinvesting the tax in the announced "green" improvements, using the revenue to cover current expenses. This has caused great discontent among tourists in Mallorca. Furthermore, even if the purpose of the tax is disguised with good intentions such as "improving tourist infrastructure," our visitors are not fools and recognize that these investments should be financed through tourism revenue. If this is not the case, it is due to mismanagement by the administration.

 

In the Canary Islands, we have a historical example in the IGIC increase a decade ago: how much of it went to tourist infrastructure? Let's recall the reflection of Jorge Marichal (Ashotel): “The IGIC increase meant an increase in revenue of almost 100 million euros ONLY in the tourist accommodation sector. Of those 100 million, do you know how much has been dedicated to improving tourist destinations? Don't worry, I'll tell you: ZERO” (la opinion.es, 2015).

 

 

 

 

 

And finally, the great paradox: 

 

(5) Charge the tourist, while we lose EU funds? 

 

According to a recent news report based on an analysis by Corporación 5, "The Canary Islands waste half of the funds they receive from Brussels" (laprovincia.es, April 20, 2023). The study states that "for every two euros Brussels sends to the Islands, one is wasted due to the public administration's inability to execute the programs or projects to be fully or partially funded with EU money in a timely manner." Do we really want to fleece the pockets of tourists with all the dissuasive risks (see point 2) and competitive distortions (see point 3) that this entails, while we are unable to use the funds already allocated to the Canary Islands? Wouldn't it be better to focus our efforts on implementing the assigned projects?

 

Conclusion 

 

In short, the risks involved in implementing a tourist tax at this time strongly suggest abstaining from its application in the Canary Islands. Let's forget about it! This debate shouldn't even be on the table.