Friday, May 14, 1999

Not much added value to the tax on Margarita Island

If there is anything that has to do with economics that has been proven with absolute clarity over the last few decades is the unsurpassable capacity of the Venezuelan State to misspend its resources. In this sense, an recipe for getting ourselves out of this inherited economic disaster that begins with the transfer of additional resources to the government is utterly incomprehensible to me, and I am a fierce enemy of all new taxation, even more so when we are talking about the Value Added Tax (IVA) that does not provide even the slightest redistribution of income.

However, in the case of the Island of Margarita, I refuse to spend much of my energy in protesting the recently decreed VAT. My reasons? As the say in local argot, what’s one more stripe for a tiger?

In Venezuela today, tourism is the only sector that promises the potential of creating so many externally competitive and productive jobs. The Dominican Republic’s income from tourism during last year was in the neighborhood of US$ 2.5 billion. There is no question that today we should be rallying the entire country around a National Plan for Tourism, centered principally in Margarita.

But no! In September of last year, instead of investing in a submarine cable to Margarita from the mainland so as to be able to supply the island with cheap energy (a public service of utmost importance to tourism), the latter divested in tourism when it blithely sent the US$ 60 million obtained from the privatization of its power company to the National Treasury. Margarita’s hotels often spend more for power than they do in covering its payroll.

A real plan to promote tourism on the island would focus everyone on finding solutions for getting water to the island’s population and hotels cheaply and securely. This could, for example, be done either by installing a new pipeline under the sea from the mainland financed by multilateral entities or by offering to supply free or cheap gas which would permit the fueling of desalination plants that would not be ruinously expensive. Today, all we see are plans to install gas lines so as to be able to sell gas to the island at international prices.

Anyone that had a real interest in promoting tourism on Margarita would not allow the Bolivar to overvalue to the point that the only tourism promoted is the international tourism of Venezuelans.

Anyone that had a real interest in promoting tourism on Margarita would have offered fuel at marginal cost to all international flights that come from more that 1,000 kilometers away, that carry 100 tourists that will stay for over one week. In Europe, for every 100 units paid for gasoline by the consumer, only 10 goes to the producer of the same. I am sure that each barrel “given as a gift to tourism” would be economically more beneficial to the country than its direct sale.

More investment in Margarita would create more jobs. Instead, mediocre advisors recommend the application of the VAT for Margarita in the name of anti-national national solidarity and based on minor issues that only promote equality downwards. Even some representatives of the private sector applaud the application of another tax.

For Heaven’s sake, let us create some added value on the island before we think of taxing it!

Published in the Daily Journal, Caracas, May 14, 1999