Finance Ministry Parliamentary Secretary Tonio Fenech speaks at the Malta Institute of Taxation’s recent 10th Anniversary and lauds the Institute for being more than a mere debating society and for establishing its place in the fabric of Malta’s public and financial administration
I am particularly happy to be addressing this Seminar which is being held on the tenth anniversary of the foundation of the Malta Institute of Taxation. It is refreshing to note that in our country busy professional practitioners can still find the time and energy to get together to promote the study of the principles, administration and practice of taxation, without intending to use the Institute for their own personal professional interests. Moreover, this is no mere debating society: the tangible results achieved are there for all to see, and the Institute now has an established place in the fabric of public and financial administration of our country.
My congratulations to the Institute and its Council: please keep up the good work. You may rest assured that Government fully appreciates your efforts and intends to continue giving its full support. You will recollect that in my first address at these seminars I had promised that there would be more meaningful consultations with the Institute. Arrangements are in train for this purpose: the first meetings have been held and have already borne fruit.
Finance is an essential feature of public administration. Indeed, it can be considered to be the hub around which the administration of the country revolves. While everyone’s pressing Government to curb public spending, demands from various socio and economic sectors persistently pressure Government to increase its spending for one reason or another. What is sometimes not clearly realised is that Government can only spend what it has: revenue and expenditure have more or less to balance. Government can only act as an honest broker trying to match expenditure requirements with available finance.
While the Government has placed the sustainability of public finances as one of its main priorities, this by no way implies that our country is in some sort of national debt crises as some may seem to imply, particularly when one compares the level of our public debt as a ratio of Gross Domestic Product and compares our position to those of other EU member states. Malta today stands at 72 per cent of GDP, 12 percentage points from the benchmark of 60 per cent established in the Maastricht Criteria. I would like to point out that with Greece and Italy exceeding 105 per cent to GDP, while still we have some work to do surely not an insurmountable task. Also, this week’s EU Commission pronouncement on the fact that the Government is on track in its fiscal consolidation program shows that the pains we have had to pass through are yielding the desired outcomes. And I must emphasise an important message to those who want to invest in our economy.
On the other hand comparisons conveniently ignore a fundamental factor: namely that our GDP is still below the average in the EU This is something which Government is committed to address, and one of the main aims of our joining the EU. Whether we do so or not, however, will depend very much on our own efforts and energies, which I suggest we should not dissipate on useless wrangling on every issue that comes up for determination.
Clearly, members of the Institute must play a leading part in helping on the revenue side of the financial equation which I have set out. I fully appreciate that we have a complimentary part to play in ascertaining that the proper amount of Revenue which is due in terms of law flows into the public purse. I also appreciate that nobody likes having to pay taxes, but we are all citizens of the same country, and what we put into the so called “kaxxa ta’ Malta” is immediately paid back to us or invested for our benefit and for the benefit of future generations.
One of the financial issues which have now to be tackled without delay is the question of the reform of our pensions system. We have debated this issue long enough, and now it is time to act. The crucial necessity of assuring a level of pensions in the future compatible with requirements and expectations must be viewed against the background of the steadily increasing life-span and decreasing birth rate. Our present system is already under strain due to the pressures caused by the demographic shift of our ageing society. A fresh and more scientific approach must now be followed. Our own future and that of future generations require that we do not sweep this problem under the carpet until it is too late. Government has published an extensive white paper on the subject, and it is intended to introduce legislation when sufficient time has been allowed for public debate and consideration.
It is an accepted principle that pension arrangements and pension schemes have to be motivated by suitable tax arrangements, and I am glad to note that the Institute some time ago put forward its initial submissions on the subject. I now expect the Institute to amplify on the submissions made to help further in the formulation of a pensions policy that will meet the requirements of the future.
Pensions which were formerly almost unheard of except in certain public employments are today as much part of the social fabric as health and education, and Government is likewise committed to achieve the highest possible standards in this regards. Clearly this will cast a further burden on the economy, and adequate and sustainable pensions for the future cannot be met solely out of the public purse. Hence the three pillar approach advocated in the White Paper. When all is said and done, however, pensions will continue to absorb a large slice of public expenditure. Deficit budgeting on the scale of some years back is out of the question, and the main source of revenue will obviously have to be taxation.
Government is committed to having a fair tax system which must, however, be implemented with thoroughness. Tax law is there to be implemented and faithfully adhered to. We have introduced a degree of information technology in public administration that would have been considered impossible a few years back, and this should help us free resources to tackle crucial cases that have to be solved. We need to pick up the tempo in this respect, and also to deal with finality certain issues with which the administration has been plagued for far too long.
I look forward to working hand in hand with the Institute in what must be a combined effort to have an acceptable system of taxation that works effectively, rapidly and fairly, and what is perhaps most difficult to achieve, to be accepted as such by those who have to foot the bill – the taxpayers.