The Spanish government has increased hotel tax from 8% to 10% as part of a new austerity package of tax hikes and spending cuts.
The increase is far less than the industry was expecting. Some feared the tax could increase by as much as 10% to bring it in line with the country’s main VAT rate of 18%.
The new level of tax is likely to be absorbed by hotels this year and will be passed on to suppliers from summer 2013.
The package announced by prime minister Mariano Rajoy also included a a two percentage point increase on goods such as public transport fares, processed foods and bar services.
VAT will go up almost immediately from 18% to 21% and there will be a 3.5bn euro cut in local authority budgets.
Bill Allen, managing director of the On Holiday Group, said: “2% is a much more sensible approach. There was a similar increase in Canaries a few weeks back and there the hotels absorbed the increase – we’d expect the same to happen now in Spain.
“No increase would have been better but overall this is a victory for common sense.”