Brincat criticises freeport borrowing plans

Opposition finance spokesman Leo Brincat has criticised plans by Malta Freeport Terminal to go into new borrowing, questioning the wisdom of the move on the eve of the planned privatisation of the freeport. He said that if the privatisation went ahead, this borrowing would have to be guaranteed by the government.

Mr Brincat was speaking during the debate on a bill to formally introduce the budget measures into law.

He also asked the government to confirm or deny that it was considering the privatisation of the shipyards.

At the beginning of his speech, Mr Brincat said the minister was trying to cushion the fact that the government was again requesting the authorisation of the House to borrow up to Lm100 million. Although the government was saying it needed this facility for reasons of flexibility, the administration was clearly with its back to the wall. It had also raised the ceiling on treasury bills last November. Outstanding treasury bills had been projected to stand at Lm164.6 million at the end of 2002 but up to December 27, 2002 the total amount of outstanding treasury bills stood at Lm218.8 million.

Mr Brincat criticised the way the bill had been drafted, saying it brought together many unrelated items so that the opposition was being put in a position where it had to vote "no" even though there were parts of the bill which it agreed with.

He criticised the government over its borrowing and said Malta Freeport Terminal, a subsidiary of the freeport corporation, was about to go into new borrowing. Upon privatisation, the debt would have to be passed on to Malta Freeport Ltd and the government would have to issue a guarantee. Was this wise on the eve of privatisation?

Mr Brincat said new taxes had been introduced which were not in the interest of the economy, such as the introduction of the capital gains tax when the value of shares was going down.

Another example was how the people were not encouraged to repatriate funds they had invested abroad. As a result, funds had been registered, but not repatriated.

He complained that the government was eroding the element of professional secrecy on the excuse that it needed new measures to fight abuse. Heads of department were being given discretion to interpret tax legislation when the law stated that the interpretation of the law depended on the letter of the law. The underlying philosophy should be defined and ambiguity removed.

Mr Brincat said the budget was failing to kick start the economy and was irrelevant to people's lives.

What had become of the privatisation programme, which was barely mentioned in the budget speech?

Could the government confirm or deny reports that it was considering the privatisation of the shipyards?

Mr Brincat said he was informed that after the budget MITTS, the government IT agency, was instructed by the Finance Ministry to reverse certain entries which had already been processed so as to reduce the deficit. A meeting had been held and this proposal was felt to be so unorthodox that MITTS requested written instructions. The process also involved the writing of special software.

This authorisation was finally given and government departments concerned were requested to stop certain transactions and reverse others which had been processed.

Had there been a resignation culture in Malta, he would have called for the minister's resignation, Mr Brincat said, adding that this issue was shameful and smelled of a cover-up.

The government could argue that this was not irregular and was part of the financial rolling-over plan. But an administrative measure was not necessarily legal and correct and it could even be in breach of the constitution.

This was because an appropriation bill for a specific year could not be carried forward. The amount involved, he said, was of Lm10 million and would affect provisions for 2003, when there would probably be a change in government.

This strengthened the MLP's commitment to commission an independent audit of the state of public finances as soon as it was returned to office.

Speaking about the investment registration scheme, Mr Brincat said the government should be clear in its intentions. It was fair and logical to penalise those who could have repatriated funds while the investment registration scheme was in place, without taking part in the scheme. But what of those who brought their money back before the scheme?

On a point of order, Finance Minister John Dalli said that those who registered their funds when the scheme was in place were protected by a firewall for income tax purposes. Funds which had not been registered could not expect the same treatment.

Continuing, Mr Brincat called for wide consultation which should lead to the revision of the Income Tax Act to render it less hostile but more clear and effective.

Mr Brincat said he agreed with the provisions of the bill for pension arrears to be taxed according to when the pension was due, and said he felt this arrangement should also apply for other arrears.

Dr Michael Asciak (PN) praised the budget for preparing Malta to join the EU, saying EU membership would lead to a higher level of economic activity and more jobs for the Maltese. This was a budget which would leave more money in the people's pockets. The MLP was clearly seeking to scare workers over EU membership, yet the Maltese would have to compete with others to export their products even if they stayed out of the Union. EU membership would, however, put Malta in a better position to face that competition.

Countries which had stayed out of the EU were realising that staying out involved a bitter cost, not only in the financial sense, but also because investors left the country.

Opposition agriculture spokesman Noel Farrugia insisted that EU membership would rob Malta of the flexibility it needed to manage its food imports according to the best markets available. In the past three years, Medigrain had saved E26.3 million as it had not been subject to pay internal EU rates or tariffs as these products were not imported from member states.

Although the government had promised it would negotiate special conditions, it had now bound itself to subsidise the difference between the EU's prices and current prices from the people's pocket.

Malta would, on the other hand, be subsiding EU farmers who produced products not grown locally such as tobacco.

Labour's partnership policy would guarantee Malta the flexibility it needed in the sourcing of its imports.

Finance Minister John Dalli asked for such guarantees to be put on the table of the House, saying that Mr Farrugia should otherwise admit they did not exist.

Mr Farrugia said the guarantees were bound to the meaning of globalisation. The EU, he said, had registered with the World Trade Organisation 589 special safeguards to protect its agriculture sector. With the partnership policy, Malta too would retain its flexibility.

Mr Dalli said Mr Farrugia was assuming that the partnership had been negotiated. He should put what was completed on the table of the House.

Mr Farrugia said that in the first year the government would be forking out E11 million to subsidise the price of sugar, when this product could continue to be imported at cheaper rates under the partnership.

Mr Dalli asked if Mr Farrugia was saying that there was a partnership agreement which was saying all this.

Mr Farrugia said he was quoting OECD sources and the practice of world trade.

Labour MP Evarist Bartolo observed that the budget measures included the removal of VAT from dancing and music. But all EU member states were obliged to charge VAT on information services, cultural, educational, sports, scientific and recreational activities, among others. So this budget measure was just a temporary one - part of the government strategy to avoid burdens before membership.

The imposition of VAT on books and printed matter would have a negative effect on society and would raise education costs.

At the same time that Maltese was accepted as an EU official language, Maltese was removed as an entry requirement to the law course at university, clearly to make it easier for EU students to study law in Malta. But as a result of this decision, fewer Maltese were studying Maltese at sixth form level.

The MLP policy on VAT would leave education, sports and culture tax free, Mr Bartolo said.

Notary Joe Cilia (MLP) referred to the amendments on stamp duty. He said that currently, when a property was sold, a government architect inspected the premises to estimate its value for the purposes of stamp duty and whenever it was felt that the parties to the contract had under-declared the value in the contract, they were asked to pay the difference and fined. Those affected used to object and the fine was then normally reduced.

Now the fine was to be reduced if it was paid promptly. One would pay 10 per cent of the fine if this was paid within a month, 20 per cent if paid within two months and so on.

This meant that somebody who owed the government Lm100 could end up paying Lm1,000 if the fine was not paid after nine months.

But during the budget speech, the government had said that the fine could not reach more than double the amount due.

Notary Cilia said that when buying a residence, one paid duty at 3.5 per cent for the first Lm20,000, and five per cent on the remaining value. The government was now increasing the initial amount at 3.5 per cent for the first Lm30,000. This had long been overdue. However anybody buying his first house at Lm20,000 and separately buying a garage for his car at Lm5,000 would still be taxed at five per cent because those were two contracts. This was an injustice and this measure should cover both residences and garages, even if these were not bought at the same time.