19 November 2003

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Toon this week: Slippery fish

We can’t have our cake and eat it

While Monday’s budget measures will probably not receive resounding approval, there seems to be consensus that Malta faces serious economic problems and something has to be done. We all want our cake and to eat it, but that is simply not possible given our country’s economic situation.
There is no gain without pain, and it would be sensible for us to look at the long-term prospects of any measures considered.
If the budget that is presented hits some of us, but in its complexity shows a way of putting Malta on a sustainable footing then it should be welcomed, even if we don’t get to eat cake in the short term.
Politicians rarely like to consider the long term and we are generally no different, but with EU accession looming, Malta cannot afford not to take courageous decisions, no matter how unpopular.
The constituted bodies have already sounded their trumpets of resistance to increased consumer taxes and higher pension ages. It is a matter of some surprise to be sure that there is so much disparity between what the government, including the Prime Minister is suggesting, and the stands of the constituted bodies.
Only recently the finance minister met the constituted bodies for a three day retreat at the Mgarr Hotel in Gozo, and while no agreement was reached, it was reported that there was a meeting of the minds and that a greater understanding of each others’ positions was achieved. Judging by recent public statements of the GRTU, GWU and FOI, it would seem that nothing of the sort was achieved.
Nobody except a masochist will envy John Dalli Monday when he announces his ‘unpopular’ measures, but history will judge him adversely if he does not.
Faced with a deficit that government has not managed to get the better of, there are several options to raise revenue or reduce costs.
The most obvious is to up taxation, unpopular no doubt, but hard to avoid. This could come in the form of increased consumer tax, as has been suggested or higher income tax. Expect that Dalli will choose at least one of these.
Fighting tax evasion could lead to increased revenue, there have been calls for this over the years from various quarters and no doubt there is moral justification. The problems of going down this road however are not small and often trying to fight evasion can be more costly and result in even more corruption. So, yes, but it has to be a cleverly thought out scheme.
Downsizing government will not be popular with some, but should be welcomed by most. While it is never enjoyable to read about people losing their jobs, it is also socially unacceptable to bear the costs of well-paid and under-delivering civil servants.
Reducing welfare abuse and freebies is on the cards and will be welcomed, although it is unclear sort of a saving will be made.
Eco-taxation has been spoken about for years and should now start creeping in. While governments have not been enthusiastic to protect the environment by fiscal measures, now may be the time to do it as options always exist for consumers to choose other products.
Government accountability and control over government spending have long been called for and will be welcomed by all.
Rationalising Malta’s essential utilities like energy has been long overdue, and should be welcomed by those in business as well as the public as water and electricity costs would be reduced.
The pension age is likely to increase, perhaps not next Monday, but in the coming months. While this is welcomed, measures taken to encourage more women to take on paid jobs could prove to be a better alternative and should be seriously considered.
One measure nobody is likely to object to, and which will increase spending power would be to increase the non-taxable bands. People with lower incomes will agree, and while in the short term government will lose some revenue, the measure could result in the increased and investment that the economy sorely needs.
John Dalli would do well to spread the load of measures over the entire spectrum of possible fiscal decisions and come Monday expect a mixture of all the above.

Copyright © Newsworks Ltd. Malta.
Editor: Saviour Balzan
The Malta Financial & Business Times, Newsworks Ltd, Vjal ir-Rihan, San Gwann
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