Economic Policy Review ISSN 1313 - 0544

The Tourism Responds to the Crisis

Author: Zornitsa Manolova / 28.05.2009
Rate This Article:

The crisis gave rise to many requests from almost every sector. The continuous "pulling of the blanket" increased the efforts of all separate groups from the economic life which made the pressure on the government even stronger.

As a result, at the end of last week a decision was made to help one of the most affected sectors from the economic crisis - the tourism. The government will pay the fees for issuing tourist visas to Bulgaria for foreigners. The issue is the visas of the Russians, which would be encouraged to visit our resorts by saving... €11 (this is the price of the tax for a private company which is providing the service). For one year the attraction of foreigners would cost the Bulgarian taxpayer approximately €1.5 million.

That was one of the requests by the tourist branch this year. In order to be ready for the following steps of the government in that direction, here is what we could expect to pay:

  • The tourist's visas. The tourist branch insists that the state should cover the total costs for the visas of the foreign tourists. The organizations of the sector have calculated that in order to do those would be needed about €8 million, for attracting tourists from Russia, Ukraine and Belarus.  
  • Airport taxes. Another request is that the airport taxes for the charter carriers should also be paid form the state budget.
  • Tourist advertising. We must prepare 20 million levs to advertise the Bulgarian tourist product, if the government decides to satisfy this request also.
  • The VAT on tourists' services. Only the hotel owners and the tour-operators pay 7% VAT. A month ago they insisted for reduction of the VAT to 5%, i.e. the only branch which carry a three times smaller burden, wants further "reduction".
  • The office workers - tourists. After the tourist organizations requested at the beginning of the year state subsidies for every Bulgarian tourist, who stayed more than 5 days in a Bulgarian resort, recently they began to insist for at least vouchers for vacation of the state office workers.
  • An export sector. A few months ago the tourist organizations insisted to the Prime Minister that tourism should be officially recognized as an export sector in order to use the credit lines of the Bulgarian Development Bank.

The requests give rise to the question whether the state could take money from all people and distribute them to a specific group as it thinks fit. Instead of that, besides reduction of taxes, the government could attempt to create a favorable environment for business in the entire economy, not only for separate sectors.

After declaring the tourist sector for a priority during 2001, the state declared its special care for that sector. Actually the problem is in defining of a specific sector as a priority. Deferring from another priority sector, the agricultural, where the state is paying out millions of levs every year, the tourist sector was developing well without state aid, because the consumers defined it as a priority and paid for the product or the service. The common between the two is that the taxpayer is paying. The difference is that in one case this sponsorship is voluntary, while in the other - mandatory according to what the state employees think (plus an additional amount to pay the salaries of these same employees). In this line of thinking, I would like to emphasize, that a priority sector is that which is preferred by the mass-consumers at a given moment of time. Thus, during the times of a crisis, when the demand for the services of the tourist branch is falling, there must be a reduction in supply. When the crisis is over and the demand increases, there is no reason to worry that there would be no one to respond to it.

We could not expect the state to "save" every company and every hotel, in this case, which could not handle the market conditions. Any way the freedom to fail is the other side of the freedom to succeed.

The paradox in this case is that most Bulgarians, cutting their budgets, most likely would miss the sea this year, but they would have to pay for the vacation of the foreign tourists.