02 APRIL 2003

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Toon this week: Trouble in paradise

Labour’s dangerous tax cut flop

The Labour Party’s proposals to exempt wage earners from income tax and to pay bonuses in its first two months should it be elected to government have been the talk of the town. Not everybody spoke about them using the same terminology certainly, but Malta has been gripped by tax rebate fever.
In reality, the proposals are so evidently a vote catching exercise that the temptation to ignore them is great.
What must be clear to everyone is that the proposed Lm25 million tax cut is but a drop in the ocean when compared to a national GDP of Lm1.7 billion. Considering that, for many people, the tax cuts would mean Lm5 more in their pockets for two months, the supposed scheme to stimulate Malta’s economy does not stand a snowball’s chance in hell.
Added to this is the fact that spending habits may not, in fact, be altered by the rebates and any extra spending power would most likely go on imported goods, effectively further weakening Malta’s balance of payments. Such a development would result in a loss of foreign reserves at the Central Bank, which some experts have calculated at as much as Lm20 million. Given this, we quickly begin to see the uselessness of the exercise.
When we realise that most of the Lm25 million would merely help the economies of those countries we happen to import from rather than our own, the futility of Labour’s exercise becomes all the more evident.
The fact that Dr Alfred Sant has played a desperate card in what can only be seen as a vote catching exercise, must have been evident from the first moment we saw his artificial smile as he announced the rebates on TV.
Malta seems to have a penchant for tax reduction schemes and tax avoidance and evasion are a national pastime, so Alfred Sant’s proposals should not really have taken anyone by surprise. Both Dom Mintoff and George Borg Olivier, before Sant, liked that sort of game.
Mintoff won narrowly in 1971 and Borg Olivier lost in 1976. Sant’s gimmicks must be seen for what they are - useless, if not dangerous.
Indeed it is hard to square the circle when someone so critical of Malta’s handling of its deficit is now, on the eve of the elections, making a proposal that will make it all the more difficult for Malta to handle its structural deficit problems. These are the actions of an irresponsible politician, one who is endangering Malta’s chance to join a very useful economic block in our region.
A politician who has shown that for a few votes one is prepared to put the entire economy at risk. The sooner we see the end of this the better.

Copyright © Newsworks Ltd. Malta.
Editor: Saviour Balzan
The Business Times, Newsworks Ltd, 2 Cali House, Vjal ir-Rihan, San Gwann SGN 02, Malta
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