28 Feb. - 6 March 2001

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Go for fringe benefits but then act accordingly…

To be pro-business was at one time to favour no taxes at all. And it is therefore strange that any newspaper or politician who acts as the poseur of the business community should take a different stance to such a view.

And yet we will, but only on three sacred conditions.

We are of course talking about the fringe benefit issue.

There are no arguments to sustain the way fringe benefits have been handled in this small nation.

Which, if one is honest, means watching a chunk of one's salary – even as much as 40% - being discarded as non-taxable.

So, whereas, salaried workers, most especially those in the public sector and the vast majority of blue collar and white collar workers in the private sector had fixed salaries; a select few and here we are talking of approximately 10,000 individuals if not less have the wonderful opportunity of only declaring a reduced amount of their income.

The situation with higher executives is more interesting, as it is they who channel fringe expenses into apartments, homes, cars and many other luxuries.

And sometimes the cars were disguised as company cars when they were really sports cars and nothing more.

No one likes to pays taxes, as Dr Sant discovered to his consternation in 1998 and his delight in 2001.

And the five wise members, the FOI, the Chamber, the GRTU, the Employers' Association and the MHRA had very strong words for the government. The words scripted by the hand of a hard hat such as the FOI's Edwin Calleja were cold, unkind and stern.

And here, the salient message was that the treatment of fringe benefits was 'incorrect'.

The statement hit out unfairly at the Finance minister and worse still it suggested that the MCED was simply serving as a rubber stamp for the minister, whom they went as far as describing as draconian.

This was swiftly rebutted by Mr Dalli, who said that the MCED's position did not mean that the government would have to abdicate from its responsibilities.

The five organisations are now blaming the fringe benefits' issue for liquidity problems because, according to them, companies will have to increase salaries for their employees.

And this will stifle the economy.

Which is to say that only tax evasion or fewer taxes will take the economy to a high.

But this is wrong, for the simple reason that when taxes were reduced because of the abolition of VAT and the reintroduction of CET, the economy drooped and dropped. So please take note please, Mr Calleja.

We are in favour of fringe benefits that make sense and not ones that allow individuals to hide behind archaic regulations to avoid paying taxes.

Having said this, we will still encode our conditions, which we feel strongly, about.

The first is that the focus on the private sector must be matched by the focus on the public sector. As much as tax evasion is not to be tolerated, so is the waste of public funds such as that at the Malta Drydocks.

The second is that if revenue from taxes does bring in the cash that government needs, then it follows that there must be a number of tax rebate programmes, investment projects and the due consideration for an eventual reform in tax brackets.

And thirdly, we must realise that the initiative to create wealth must be nurtured constantly. And here again, it is of utmost importance that the government identifies this signal when it appears and when the time is ripe.

The Business Times, Network House, Vjal ir-Rihan San Gwann SGN 07
Tel: (356) 382741-3, 382745-6 | Fax: (356) 385075 | e-mail: editorial@networkpublications.com.mt