15 JANUARY 2003

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Leo Brincat favours VAT retention despite personal reservations

By Kurt Sansone

Labour Party finance spokesperson Leo Brincat may harbour reservations about VAT but it was a core group chaired by him that suggested the MLP national executive adopt a motion to retain the taxation system.

The core group, made up of experts, was entrusted by the Labour Party to analyse VAT legislation. The unanimous decision of the core group was to retain VAT even if Labour leader Alfred Sant and other high profile officials in the party disagree in principle with the taxation system.

In an interview that will be aired in tomorrow’s edition of the TVM programme Reporter, Mr Brincat will say that it would be disruptive for the economy if VAT is removed again.

The programme is produced by our sister publication MaltaToday.

Mr Brincat will justify the Opposition’s change of heart on VAT by quoting an electoral slogan adopted by the Labour Party before the 1996 election, which stated that that election was the ‘last chance to remove VAT’. Asked the reason why the Labour Party took so long to decide on the issue after the 1998 election, Mr Brincat will argue that the party had to know how the legislation was going to change before deciding on the matter.

The Labour Party national executive has put forward a motion to be discussed in the party’s forthcoming general conference, which proposes the retention of VAT with some modifications to make it less of a burden on consumers and self employed.

In the interview Leo Brincat will say that it is in the national interest not to shake the economy one more time given that VAT legislation is now in its fourth year of existence. "Today the situation is different from 1996 when VAT had only been in place for less than two years and people were still getting used to it," Mr Brincat will tell the programme.

Asked whether relations with the European Union had anything to do with the decision of the national executive Mr Brincat will say that the decision was taken solely with the national interest in mind. "We have bound ourselves to dissolve any agreement with the EU to introduce VAT on food and medicine and government would be in a position to alleviate the tax burden on certain sectors such as tourism and essential goods and services."

The Labour Party’s change of heart is a vindication for Finance Minister John Dalli, who was widely blamed for the Nationalist Party’s downfall in the 1996 election. Mr Dalli is probably the only finance minister in the world to introduce VAT twice – in 1995 and 1999.

In a press briefing held yesterday Mr Dalli expressed his regret that the Opposition took eight whole years to come around and finally decide to accept VAT. The minister remarked that they were eight wasted years that prevented the tax regime from working as efficiently as it should.

Mr Dalli also criticised the Labour Party for taking four whole years after the 1998 electoral defeat to decide on retaining VAT.

The relationship between the Labour Party and VAT has been a rocky one. In 1996, removal of VAT was at the core of the Labour Party’s electoral campaign. When Labour was elected to government the taxation system was replaced with a fudged alternative that eventually had to be modified if the party went ahead with its free trade agreement with the EU. VAT also claimed the scalp of then finance minister Lino Spiteri, who openly declared his position against the removal of VAT.

The taxation system was re-introduced in 1999 after the Nationalist Party re-election to government.

It was only last Saturday that Labour leader Alfred Sant declared that the general conference will be asked to approve a motion put forward by the national executive in favour of retaining the taxation system. The Labour leader also said that he personally does not agree in principle with VAT.

A number of Labour exponents, including financial consultant and prospective candidate Alfred Mifsud, had openly declared their position in favour of retaining the indirect taxation.



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