Cham­ber dis­ap­pointed at lack of en­ergy rate cuts

Malta Independent - - BUDGET 2017 -

In its pre­lim­i­nary re­ac­tion to last night’s bud­get, the Malta Cham­ber of Com­merce, En­ter­prise and In­dus­try noted the un­der­ly­ing pri­or­i­ties of the 2017 Bud­get, namely, fis­cal con­sol­i­da­tion, strong eco­nomic growth and bet­ter liv­ing stan­dards for all.

These pri­or­i­ties are sim­i­lar to the ob­jec­tives the Cham­ber it­self pro­posed dur­ing its ac­tive par­tic­i­pa­tion in this year’s bud­get con­sul­ta­tion process. Here, in fact, it ad­vo­cated fur­ther progress in fis­cal con­sol­i­da­tion and na­tional com­pet­i­tive­ness.

It is noted that this year’s bud­get con­tin­ues to build on pre­vi­ous years’ ef­forts in a num­ber of other ar­eas in­clud­ing in­come sup­port for low and mid­dle-in­come earn­ers and pen­sion­ers, fur­ther in­vest­ment in hu­man re­sources, en­vi­ron­men­tal ini­tia­tives and trans­port in­fra­struc­ture. It is also noted that, save for cer­tain ex­cise tax mea­sures, the bud­get speech has spared ma­jor sur­prises and shocks on pri­vate eco­nomic op­er­a­tors.

Pub­lic Fi­nances

The Cham­ber is en­cour­aged by the re­mark­able rate of eco­nomic ex­pan­sion over the past quar­ters and the man­ner in which this is sup­port­ing pub­lic fi­nance con­sol­i­da­tion. In­deed, the 0.7% deficit to GDP ra­tio for 2016 and 0.5% ra­tio for 2017 is en­cour­ag­ing, but as credit rat­ing agen­cies have con­sis­tently re­marked, the coun­try must not al­low for any com­pla­cency and must at all costs en­sure that there are no slip­pages in at least three ar­eas: • Pub­lic Fi­nances in­clud­ing funds al­lo­cated for sec­toral re­struc­tur­ing and the for­ma­tion of new ini­tia­tives • Con­tin­ued re­form pro­grammes in pen­sions and health­care • The suc­cess­ful set­ting up of part­ner­ships with the pri­vate sec­tor In this re­gard, it is un­der­stand­able that so­ci­ety reaps a just ben­e­fit from eco­nomic pros­per­ity through the re­dis­tribu­tive role of Govern­ment and the an­nual bud­get. Nev­er­the­less, this re­dis­tribu­tive ex­er­cise must be made in full recog­ni­tion of the pri­vate sec­tor and its wealth gen­er­a­tion role in the econ­omy. In this light, the Cham­ber com­mends the tax in­cen­tives granted on vol­un­tary se­cond-pil­lar pen­sions as it had it­self rec­om­mended prior to the Bud­get.

Com­pet­i­tive-En­hanc­ing Mea­sures

The Cham­ber wel­comes the ef­forts be­ing made in the area of com­pet­i­tive­ness, in par­tic­u­lar: • Ac­cess to fi­nance via the seed­cap­i­tal for set­ting up of the Devel­op­ment Bank • Tax in­cen­tives on div­i­dends from com­pa­nies listed on the Malta Stock Ex­change • Tax de­duc­tions Em­ploy­er­schemes for trans­port of work­ers • Tax in­cen­tives on trans­fer of

fam­ily busi­nesses (for 2017) • The at­trac­tion of an in­ter­na­tional ac­cel­er­a­tor for lo­cal start-up com­pa­nies • A pro­posal to sup­port com­pa­nies to fa­cil­i­tate the re­search and com­mer­cial­i­sa­tion of in­no­va­tive prod­ucts and ser­vices • Var­i­ous Malta En­ter­prise ad­min­is­tered schemes for busi­ness • The in­tro­duc­tion of per­mit­ting (plan­ning) fees ap­pli­ca­ble to in­dus­try • Sim­pli­fi­ca­tion of li­cens­ing and start-up pro­ce­dures for busi­ness. On the other hand, in terms of com­pet­i­tive­ness, the Cham­ber be­lieves that the fol­low­ing mea­sures could be detri­men­tal to the pri­vate sec­tor. These are re­lated to COLA, En­ergy Rates for busi­ness and pro­posed sick leave for par­ents with sick chil­dren as de­tailed here­un­der.

COLA

The Cham­ber noted the an­nounced fig­ure for COLA next year. Gen­er­ally speak­ing, €1.75 is not an un­af­ford­able fig­ure for em­ploy­ers but it de­parts from that which would have ap­plied us­ing the stan­dard mech­a­nism in that it in­cludes an an­tic­i­pated pay­ment. With a view to avoid sim­i­lar ar­range­ments which could be bur­den­some on com­pet­i­tive­ness, the Cham­ber re­news its call for ad­just­ments to the COLA mech­a­nism in terms of the for­mula used and an up­dat­ing of the Re­tail Price In­dex through a re­vised House­hold Bud­getary Survey.

En­ergy

The Malta Cham­ber is dis­ap­pointed to note that that there were no mea­sures to ad­dress the fur­ther low­er­ing of en­ergy tar­iffs for busi­ness, which was the Cham­ber’s prime rec­om­men­da­tion prior to this year’s bud­get. It is feared that this fact may sup­port fur­ther ero­sion in Malta’s com­pet­i­tive po­si­tion in cost-sen­si­tive sec­tors rel­a­tive to other re­gions and states.

Ac­cord­ing to of­fi­cial sta­tis­tics for In­dus­trial En­ergy Rates for the se­cond half of 2015 – as re­pro­duced by Euro­stat last Au­gust – elec­tric­ity prices for in­dus­trial con­sumers in­clud­ing all taxes and levies in the EU28 av­er­aged marginally lower than those avail­able for Mal­tese in­dus­trial con­sumers. More­over, Malta’s av­er­age in­dus­trial rate as quoted by Euro­stat is 36 per cent higher than the av­er­age rate avail­able in coun­tries com­pet­ing for for­eign di­rect in­vest­ment, namely Bul­garia, Czech Repub­lic, Es­to­nia, Croa­tia, Lithua­nia, Hun­gary, Poland, Ro­ma­nia and Slove­nia. In ad­di­tion, it is worth not­ing that Malta is the only EU Mem­ber State where com­mer­cial rates are higher than do­mes­tic. This dif­fer­ence stands at 12 per­cent. On av­er­age, com­mer­cial rates in the EU28 are 43 per cent cheaper than do­mes­tic rates. It is clear that the cur­rent struc­ture of en­ergy rates in Malta runs counter to the prin­ci­ple that wealth is first to be cre­ated be­fore distributed and does not bode well for con­tin­ued eco­nomic ex­pan­sion and wealth cre­ation in the coun­try.

Sick Leave

The Cham­ber un­der­stands the pur­pose for Govern­ment’s pro­posal to ex­tend sick leave to work­ers with sick chil­dren. This may serve to en­cour­age fur­ther labour mar­ket par­tic­i­pa­tion. How­ever, the Cham­ber wishes to point out that this mea­sure needs to be de­signed and im­ple­mented care­fully as it may lead to fur­ther abuse of sick leave. Em­ploy­ers will be con­tribut­ing to the con­sul­ta­tion process lead­ing to this mea­sure.

To­wards En­sur­ing A Level Play­ing Field

The Cham­ber wel­comed the an­nounced set­ting up of a new unit to tar­get tax eva­sion through a joint ef­fort be­tween In­land Rev­enue, the VAT De­part­ment and Cus­toms. The Malta Cham­ber has been ex­tremely vo­cif­er­ous in the past on this sub­ject, as it con­sis­tently ar­gued that tax eva­sion, de­prived the state of sub­stan­tial funds that could be used bet­ter, and it placed hon­est busi­nesses at a dis­ad­van­tage. It has al­ways called for a com­pet­i­tive and lib­er­alised en­vi­ron­ment, fairly and eq­ui­tably reg­u­lated through mar­ket sur­veil­lance. Ul­ti­mately, the Cham­ber ar­gued, this would re­sult in up­hold­ing a com­pet­i­tive level play­ing field for all the busi­ness com­mu­nity. The Cham­ber wel­comes this devel­op­ment and of­fers Govern­ment all the help at its dis­posal for the suc­cess­ful im­ple­men­ta­tion of this mea­sure.

Con­clu­sion

In con­clu­sion, the Cham­ber noted that the bud­get this year fol­lows on those of pre­vi­ous years in a num­ber of ar­eas, al­though a decline in cap­i­tal ex­pen­di­ture, al­beit mar­ginal, is once again noted for 2017. The Cham­ber wel­comes the an­nounced mea­sures in the sup­port of busi­ness com­pet­i­tive­ness. At the same time, the Cham­ber notes with re­gret that yet an­other year has been lost in im­ple­ment­ing spe­cific mea­sures it had it­self pro­posed such as those for en­ergy tar­iff re­duc­tion to the detri­ment of Malta’s general com­pet­i­tive­ness po­si­tion. All in all, how­ever, this Bud­get con­tin­ues to ac­knowl­edge the pri­vate sec­tor’s im­por­tant role in the econ­omy. On its part, the Malta Cham­ber is com­mit­ted to work­ing to­wards sup­port­ing the growth of busi­ness, em­ploy­ment and pros­per­ity in Malta.

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