Constituted bodies welcome Labour's decision on VAT

The constituted bodies have applauded the Labour Party's decision to retain VAT saying the move would spell an end to the seven-year tax ping-pong and bring about more stability.

Opposition leader Alfred Sant announced on Saturday that the retention of VAT was the subject of one of three policy motions approved unanimously by the parliamentary group and the executive council of the MLP.

Many blame the Nationalist Party's downfall from government in 1996 on VAT, introduced a year earlier.

VAT was replaced by a new and to many cumbersome CET tax system by the Labour government and once again changed to VAT when the Nationalists returned prematurely to government in 1998.

The general secretary of the Malta Federation of Industry, Edwin Calleja heaved a sigh of relief and said the MLP's decision meant a possible change of government would not unleash a new tax regime to the detriment of the economy.

Mr Calleja said the FOI had always supported VAT since it considered it a reliable and modern tax system.

The FOI, he said, always believed that the sources of indirect taxation should be increased while income tax should be reduced.

"In this way, you're leaving space for investment and not taxing a source which ultimately generates wealth," he said.

Ultimately, Mr Calleja said, all operators had also been spared the cost of replacing software to cater for another tax.

Union Haddiema Maghqudin general secretary Gejtu Vella said the MLP's declaration on VAT would bring much needed stability.

Mr Vella said it was high time for politicians to put national interest ahead of politics where it involved two issues: taxation and foreign policy.

"We are on the eve of another major decision (the EU referendum) and everybody should rise above partisan politics," he said.

He said the VAT system was tried and tested in several countries and was deemed a successful method of taxation.

It was a pity that some organisations in Malta had decided to try and get political mileage out of it, he said.

Mr Vella said the disagreement over the tax system had in the last seven years been a major stumbling block for investment.

He said it was ironic that the introduction of VAT had initially led to a national strike and was deemed by many as contributing to a change in government in 1996, when there now appeared to be overall consensus.

The General Workers' Union had held a one-day national strike when VAT was re-introduced.

Contacted yesterday, GWU general secretary Tony Zarb said it was still too early to comment on the MLP's stand.

Chamber of Commerce director general Anthony Borg Cardona said the MLP's decision was a wise one.

He said a Chamber survey carried out among its members last summer had shown that over 70 per cent were happy with VAT. The results of this survey were also relayed to Dr Sant.

"We simply couldn't have afforded the mess-up we had in 1996 when VAT was removed in favour of CET," Mr Borg Cardona said.

GRTU director general Vince Farrugia said the MLP's position on VAT was discussed at yesterday's annual general meeting.

"What the MLP is proposing is in line with what the GRTU itself had recommended," Mr Farrugia said.

He said the GRTU also agreed with Dr Sant's proposals to readjust certain aspects of VAT.

Malta Hotels and Restaurants Association president Winston Zahra Jnr welcomed the MLP's proposal to retain VAT and said that another change of tax at this stage would be "a mess".

"The fact that VAT will be retained, whatever the government, was a factor of stability."

He said in the latest budget proposals, the MHRA had suggested reducing VAT on restaurants to five per cent and augured that this would in future be taken into consideration.

Mr Zahra said there were three essential issues which should never be tampered with for political gain: VAT, foreign policy and tourism.