GRTU balks at proposed VAT increase

The Association of General Retailers and Traders has warned the Finance Minister that it intends to issue directives to its members if he forges ahead with the planned three per cent increase in VAT in tomorrow's budget.

In a letter to the minister, the GRTU said it intends to convene an extraordinary general meeting after its members reacted in a chorus of disapproval to the proposed tax increase.

"What Government is proposing is economic stupidity, it is shooting itself in the foot," said GRTU director general Vince Farrugia.

Mr Farrugia would not say what the GRTU had up its sleeve, saying that any directive to its members would depend on the way Government intended to impose the increase.

Finance Minister John Dalli has failed to explain the impact of a VAT increase on the commercial sector, the economy and on employment, the GRTU held.

"Our sector will be negatively impacted and the higher VAT rate will make the already precarious situation worse," Mr Farrugia told the minister in the letter.

The GRTU does not agree that VAT-registered companies should be burdened with further responsibilities of tax collection, especially since it was now an established fact that this process was fuelling the expenses of businesses.

Government was becoming increasingly heavy-handed with those who were in line with the system, but lenient with others, Mr Farrugia lamented with The Sunday Times.

"We are fed up with a situation where those who make most noise, like the dockyard and shipbuilding, have their debts wiped out. Retailers are fed up with 'forced labour'."

Government should lead by example and should have slashed its expenditure before resorting to taxing its citizens further.

One also has to consider that so far, the commercial and services sector has made up for the reduction in jobs and investment.

Government should realise that the economy is in a terrible state of deflation, that workers are being laid off, and tourism prospects were not so rosy.

The government should introduce measures to boost output, which would allow GDP to grow and which will yield more taxation, he argued.

Little does the government realise the constant pressure consumers put on retailers to do away with VAT - and this demand comes from all sectors of society.

Mr Farrugia augured that the VAT increase would not lead to price hikes, which could prompt Government to resort to a system of price controls.

"Are we going to turn the clock back to the time of price controls and a one-off bonus? This is defunct economics.

"Government has managed its finances badly and should not resort to the consumer to make up for its mistakes. What have we done to deserve this punishment?" he asked.