In an interview with this newspaper, Finance Minister Clyde Caruana floated the idea that labour-intensive, low productive sectors should pay higher taxes, as a way of encouraging a shift to higher value-added activities. Unfortunately, the whole idea got lost as there was another part of the interview which caused greater controversy. It was Caruana’s statement that the University of Malta should start to depend less on public funding.
I would like to state at the outset that people who know me know where I stand on Malta’s political spectrum. As such, my contribution today needs to have this background scenario.
The controversy about public funding for the university reminded me that October 5 had been designated as Student Day, following the protests by university students in 1977 against government interference and the barriers that were being placed for young persons to pursue their aspiration to go to university.
Today there are still some barriers which are preventing real and comprehensive inclusion in the admittance of young people to the university, with the result that a number of them are prevented from achieving their personal objectives and there is a waste of human resources.
Going back to Caruana’s idea, I believe it was a breath of fresh air. Frankly, it was music to my ears. There are many who today advocate a change of our economic model to move up the economic value chain. I am one of them. A discussion with a friend of mine led me to think that using terms like “evolving our economic model” or “renewing our economic model” may be more appropriate. We may use whatever terms one wishes, but the substance remains the same.
Our economic model needs to evolve, shift, renew itself, change
To harp once more on this point, we need to place the human person at the heart of the economy; to ensure that every Maltese and Gozitan, regardless of their background, has a fair chance to meet their aspirations and to develop our economy on the basis of environmental considerations.
Although the key elements appear to be the country’s preparedness to handle population growth and the very high population density, from an economic perspective there are two even more important considerations.
The first is the level of skills which the non-Maltese population has brought to Malta. I am not referring to language skills, which are also essential. I am referring to technical skills, be it in engineering, be it in IT, be it in other areas. In effect, there are in place schemes which incentivise the importation of highly skilled persons and this is what we needed.
The second consideration is linked to low wages, as it would seem that employers are employing third-country nationals because they are low-cost – certainly not the way to move up the value chain.
This takes us back to the finance minister’s idea − labour-intensive, low productive sectors should pay higher taxes. This means using taxation to disincentivise employers from resorting to low-cost labour.
I would also add that, irrespective of the value added, we still need a vibrant agricultural and fisheries sector in Malta and a high-level manufacturing sector. The resilience of our economy lies in its diversification.
Our economic model needs to evolve, shift, renew itself, change. Caruana’s idea needs to be debated objectively with the common good in mind, sooner rather than later. It also needs to be supplemented with new ideas. We can no longer run away from the issue.