'Government fails to announce new tariffs'

Introducing the Bill implementing the measures announced in the 2010 Budget, Finance Minister Tonio Fenech had failed to announce the new energy tariffs, opposition spokesman on finance Charles Mangion said on Tuesday. He said these new tariffs would wipe out any budget benefits and the government was not heeding a wake-up call as it was in a state of denial.

The impact on competiveness, the purchasing power and the economic activity had already been tested during 2009 when the government experienced less revenue from VAT and income tax.

The increases affect the very nature of price-sensitive sectors like tourism and the exports. It was evident that a social and economic impact assessment had not been made. This would result in higher inflation. One hoped that announced schemes in the budget would all be implemented.

Dr Mangion said the Bill aimed to put in place the budget measures but it addressed amendments not resulting from the budget, including income tax, tax on documents and the Income Tax Management Act. In its original form, the Bill introduced amendments to stem revenue losses, such as those affecting the transfer of shares of listed companies on the Stock Exchange and intra-group property transfers. The minister had given the opposition further amendments to be discussed in committee stage.

Dr Mangion opined it would have been better if these amendments were presented in an ad hoc Bill, similar to the one which would be introduced on the circulation tax on vehicles.

The impact of the new circulation tax on commercial vehicles would also leave a negative effect on the construction industry which was pivotal in the internal economy, as were retailing and wholesaling activities. The new Mepa tariffs following the government's elimination of its subvention, would exacerbate the situation.

The opposition questioned government calculations that it would be collecting five per cent more than last year from VAT. The most optimistic forecast presented by Eurostat was that the Maltese economy would grow by 0.5 per cent.

Dr Mangion said that the sum total puts the Bill in an ambiguous position and the opposition could not agree with any budgetary measures which jeopardised the economy. The opposition would vote against the Bill in second reading because it disagreed with measures that adversely affected Maltese families. However, the opposition agreed with measures which aimed at blocking leakages in the collection of tax.

Turning to the present economic development, he said that the Maltese economy was in recession during 2009. Some sectors like the financial and related services, health, education and personal services sectors showed some growth. Other sectors faired very badly. The manufacturing and export sector, wholesale trade and retailing and tourism all suffered setbacks with less revenue and less profits. This led to negative economic growth.

When compared to the EU average, the GDP per capita decreased from 78 per cent in 2007 to 76.4 per cent in 2008. Although Malta's productivity was better than that registered by Cyprus in 2008, the employment rate stood at 55 per cent against the 71 per cent in Cyprus compared to the EU average.

The governor of the Central Bank attributed the loss of Malta's competitiveness on wages which increased more than productivity in 2008 when these stood at 44 per cent of the EU average. Wage increases in real terms during the past four years were very competitive. Competitiveness was adversely affected because of government bureaucracy.

What was the government doing to increase efficiency in the public service? What was it doing to address capital and productive investment?

Dr Mangion said the GDP per capita could only be strengthened through employability and better worker skills. Although Malta spent as much as other EU states on education, the results achieved were far from desirable with about 40 per cent leaving the system without the required academic and technical skills.

He called for an achievement audit at primary, secondary and post-secondary level. In certain sectors like health, and aviation it was not always easy to find employees with the right competencies.

Dr Mangion accessibility to schemes offering access to financing to hotels was limited. The cost of finance is an obstacle to micro-businesses in Malta. What action was being taken in relation to bank charges?

Between 2007 and 2009 private productive investment continued to contract on a yearly basis and for this must be adequately addressed since it eroded the operators' competitiveness.

Turing to the energy tariffs, Dr Mangion noted that only 60 per cent of the increase reflected fuel costs while the remaining 40 per cent reflected Enemalta's inefficiency. It was understandable that the government could control the international price of oil. However, the government must provide the public with transparent information on how Malta bought its oil needs and on the government's plans to mitigate against the instability of oil prices.

Minister Fenech had not addressed the impact the new tariffs would have on industry, which would be expected to pay out an additional €52 million. This would certainly impact on the expenditure of all economic sectors and the fund established by the government to help those business who would face difficulties was self-defeating.

Dr Mangion criticised the imposition of the 50c per bed per night, saying this tax would only serve to collect the €5 million given to MTA for marketing purposes. Was this justified at a time when the tourism industry had been hit hard with the international crisis?

The government should announce its plans regarding Air Malta's future. Air Malta had an important strategic value in the economic development of the country and it should neither be dismantled or sold off.

He criticised the selling off of national assets, including banks, the postal service and Holiday Inn on the premise of reducing the deficit, especially at a time when the sinking fund for local debt stood at €125 million with the government having no more assets to sell off.

Dr Mangion said the financial services sector had performed well throughout the global financial crisis and had been a positive contributor towards Malta's economic development in 2008 and 2009. This sector had developed through trained personnel and under a good legal structure which now required the government to address legal amendments which would ensure more competitiveness.