FOI calls for cut in income tax

Personal income tax rates should be brought down to give people an incentive to work and invest, rather than rely on social benefits, according to the Federation of Industry's electoral proposals.

An estimated 40 per cent of the country's GDP is going in taxation, a figure higher than countries like Ireland, Spain and the Netherlands, whose economies were flourishing, it said.

The federation also repeatedly stressed the importance of having Malta "anchored" to the European Union, and urged politicians not to miss out on the 2004 enlargement.

The 21-page long proposals were presented by FOI president Anton Borg at a news conference yesterday.

The FOI also said it disagreed with the cost of living increases that were awarded indiscriminately by law every year, in addition to the wage increases negotiated by collective agreement with the unions.

The cost of living increase should only be binding for workers who are paid at the minimum wage established each year by the government.

A national productivity index should be a point of reference for public sector wage-fixing.

This index should be established by mutual consent with the trade unions and agreement should be reached on the way wage increases are to be negotiated and pegged within the national productivity increases registered each year.

The government should also consider removing from employment and industrial relations legislation the provision that any public holiday falling on a Saturday or Sunday is to be compensated by an extra day of vacation leave.

A compiled list attached to the proposals shows that, with 38 days, Malta has the highest number of combined public holidays and legal minimum annual leave when compared to EU countries.

The government should exempt employers from income tax on the premiums they pay for private health/life insurance and pension schemes benefiting their employees.

Likewise, tax breaks should encourage people to save for their own health/ life/ pension schemes.

The government should also ensure that VAT refunds are paid within the time frame stipulated by law and that time-scales for refunding claims are to be reduced from five to two months.

The proposals focus in detail on EU membership, which the federation says would support the continued development of the economy, and particularly, of its industrial activity.

The report states that alternative relationships with the EU do not give Malta any significant advantages.

The Euro-Med free trade area, which will come into effect by 2010, would only give local industries market access in the Mediterranean countries in six years time. Besides, Malta would have "minimal, if any," financial assistance from the EU because of its relatively high per capita GDP.

On the other hand, as a member of the EU, Malta would have immediate access to the scores of bilateral trade agreements the EU has with other countries.

The FOI recommends that the next government will take immediate steps to finalise a national development plan tailor-made to the needs of the country, setting clear targets and programmes to improve the overall efficiency of the country.

The federation highlights the problem of the welfare gap and urges the next government to consider the need for reform as a top priority.

Successive governments cannot keep burying their heads in the sand, pretending the pensions problem did not exist, Mr Borg said.

Employers and employees on the other hand should be encouraged to invest in additional private health and pension schemes, by granting tax relief on premiums paid.

The federation also made a series of recommendations on reforming the running of ports, a step described by Mr Borg as a courageous initiative which would require the intervention of trade unions.

The FOI urged the government to help set up the National Competitiveness Council on a sound basis and to support its proper functioning under the Malta Council for Economic and Social Development.

The proposals were presented to the Labour Party and Alternattiva Demokratika yesterday and will be submitted to the Nationalist Party next week.