Taking the glamour out of tourism

Covid has stripped tourism of its glamour and has exposed everyone to the minutiae of how it works or struggles to work under arduous circumstances. Call it ERTE or furlough, we have become familiar with arcane detail of employment law. For weeks we have heard that, without ERTE, tourism will be even more on its knees than it already is. The Spanish government has finally reached agreement that allows tourism to survive for now. Tourism has always been beholden to employment laws, but never more so than now. So much for the glamour.

Taxation we know about because the Balearics have made tax a tourism issue above and beyond what it already was in the form of, for example, air taxes and passenger duties. The endless reference to “measures” for tourism industry assistance and relief has meant that the fiscal character of tourism has also taken centre stage. Value added tax, IVA in Spain, is not, I would suggest, a tool that the vast majority of tourists pay any real attention to. VAT rates in different countries do not enter the conversation in the way that tourist taxes do, even if they are responsible for higher cost to the consuming holidaymaker.

The VAT rates for the tourism industry, defined differently in each country, have long been a matter of argument and debate. In Spain, this reduced rate was once seven per cent. Courtesy of the financial crisis, it rose to eight and then ten per cent, with the promise that it would be brought back down. It hasn’t been. The tourism industry was demanding a readjustment long before anyone had heard of Covid. The industry has more recently been screaming this demand.

Recognising the cost impact of VAT, some EU and non-EU countries have made downward adjustments, a sizeable one of 15% lower in the case of the UK’s hospitality industry. Spain has not made any adjustment, and while the government protests that it has been ploughing millions upon millions into tourism, the industry asks why it has declined to intervene by cutting a tax that would be reflected in lower cost to the consumer.

It may actually be that the Spanish government takes the view that VAT doesn’t influence travel or eating-out decisions. It is probably right to take this view as well. As noted, it is not a tax that is uppermost in travellers’ minds. However, measures are measures, and one that can reduce cost is, right now, not to be sniffed at, while there is also the not insignificant issue of business cash flow and the requirement to make VAT returns.

On Tuesday, the Partido Popular raised a motion in Congress which called for there to be a super-reduced rate tourism IVA. The industry, such as with the Mesa del Turismo of leading figures in tourism, travel and hospitality, had been proposing a temporary cut to seven per cent until the end of 2022. A super-reduced rate couldn’t go to four per cent, which is what it is for certain products and services (newspapers, for instance), because EU rules contemplate only five per cent, which is currently the rate in Greece. Five or seven per cent, the government parties and those which supported the investiture of Pedro Sánchez as prime minister rejected the motion. Agustín Almodóbar, the PP’s tourism spokesperson in Congress, accused the government of “killing tourism”. Spain, he argued, had to “imitate” what other countries have been doing.

Meanwhile, the fifth Portuguese tourism summit was taking place in Lisbon. The country’s president, Marcelo Rebelo de Sousa, stated that the priority for tourism is to avoid the destruction of business and to preserve jobs. As such, he wasn’t saying anything that hasn’t been said in Spain, but he followed this up by announcing that the 2021 budget will factor in a VAT refund system for tourism and hospitality. VAT, in Portugal at any rate, will be a far more visible tax to tourists than it has been.

Now Portugal has tourism vouchers

There is more on tourism vouchers, another measure that Spain has not adopted. Portugal has now added itself to the list of countries which have. As with other schemes, they are designed to incentivise domestic tourism, and there will be 50% discounts for train travel, hotel bookings, meals in restaurants and more. These discounts will apply to the whole country, and the Portuguese government is currently allocating 50 million euros to the scheme.

Saying no to Imserso

l Imserso is another theme that continues to crop up, the Spanish government having decided to scrap the 2020-2021 programme of subsidised holidays for senior citizens.
In Andalusia, where the regional government has introduced its own tourism vouchers’ scheme, consideration is being given to an internal Imserso programme. The suggestion of the travel agencies confederation in Andalusia, the government is said to be viewing it “positively”.

Meanwhile, the Spanish government has stated that it will not be reconsidering its decision to cancel this year’s Imserso programme. The tourism minister, Reyes Maroto, made this clear in Congress on Tuesday in rejecting a proposal from a Canary Islands’ deputy, Ana Oramas of the Coalición Canaria, for an Imserso specific to the Canaries. Oramas noted that “it is far less dangerous to be in Tenerife, Gran Canaria, Fuerteventura and Lanzarote than in many mainland cities”. She asked the minister how European tourists are going to be attracted if the Spanish “don’t have confidence” in the Canaries as a destination.

It was perhaps interesting that it was Maroto who was dealing with this. Last week in this column, I made the case for Imserso being switched from the social rights ministry to the tourism ministry. Imserso may be a social welfare scheme, but it is fundamentally a tourism matter, with all the implications this entails - the unglamorous aspects of tourism - operations, contracts, etc. - that the tourism ministry should know far more about than a ministry which primarily exists to run social services in Spain.