Wrong shovels and done extravaganzas

When a piece of land seems hard to dig, it is not uncommon to reach for the wrong shovel. In various regards that is just what Tonio Fenech, the Parliamentary Secretary for Finance, did in defending the proposed eco-contribution in the House of Representatives last week. He grabbed more than one misshapen handle. The PM followed with more of the same.

They reiterated the government's claim that the Bill introducing the eco-contribution was based on the 'polluter pays' principle. That was, indeed, the intention declared in the budget speech for 2004. The then Finance Minister said the eco-contribution would encourage greater use of deposit refund schemes on containers.

It was intended, he explained, to discourage consumption that impacted negatively on the environment. Moreover, the scheme was to be introduced gradually. In 2004 it was to be restricted to batteries, tyres, electronic apparatus, non-edible oil and oil filters. That led to the first wrong handle.

Limited introduction during the whole of this year was calculated to generate Lm2 million in revenue, included under miscellaneous receipts in the Estimates. The forecast yield has doubled, to Lm4 million, presumably because the proposed base of the tax is now extensively wider. The PS told Parliament that, since everybody was a polluter, in one way or another, all should contribute to improving the environment.

True, but that is not what the new tax will be promoting. It will not reach everyone, unless that will be through the intricacies whereby inflation will be fanned (by a one-time addition to the inflation rate of nearly one percentage point, raising the current rate by a third) and will indeed affect everyone.

Another misshapen handle poked at refrigerators. The parliamentary secretary said that, while some products are ecologically friendly during their lifetime, such as in the case of some fridges, costs of their disposal were the same as ordinary fridges. Quite, and the citizen - though the Prime Minister did not go into this (nor did Minister George Pullicino in The Sunday Times yesterday) - already pays for their disposal through myriad taxes. These provide funds to finance, among other things, public cleansing.

Not all citizens dispose with a sense of social responsibility, notwithstanding that the authorities provide a bulk disposal service. But everyone has to dispose. If it is to become a principle that all disposals should attract the eco-tax, it might become an added cost as we pass on to the next life, leaving our earthly remains to be disposed of.

The parliamentary secretary's shovel provided a clanger when he tried to respond to criticism that the tax was also socially unjust, since it will be imposed at flat rates. He said it was decided to have those, instead of rates based on product value, because this system was easier to operate.

That is arguable. Yet, one should not ignore considerations of social justice because that makes things "easier". There is nothing easy about taxation. This one is being classified as an excise tax. VAT will be imposed on it too in the importer's distribution price. That was one straight handle touched by another parliamentary secretary, Edwin Vassallo, but left alone by Mr Fenech and the PM.

Mr Fenech's particular shovel also clanged hard against the Pandora's Box of the premises purchased in Brussels for Lm6.5 million, with a further Lm2.5 million to be spent on refurbishing, furnishing and making it an operating HQ. Once he had to get onto that patch at all the Parliamentary Secretary for Finance should have given full details of how the deal was negotiated, and done, in all its many stages.

Lawrence Gonzi, both as Minister of Finance as well as PM, might yet find that he has to take on that task himself more extensively than he has done so far. He could do worse than to start practising pre-emption.

Mr Fenech restricted himself to making assertions and leaving surprising omissions. He asserted that the rent to house an embassy meeting Malta's requirements would be Lm600,000 (annually) for 27 years. The government felt it was a wiser investment to buy the building, rather than incur Lm14 million in rent over that period.

That tested people's intelligence by premising that, in the whole of Brussels, there was no alternative to that particular building. Leaving that aside, Mr Fenech, a respected accountant, can surely do better than offer such light one-item menus without explaining the ingredients properly.

He might have used his professional expertise to give the House a technical present value analysis of the purchasing and renting options regarding that building. PV analysis would reduce the Lm14 million rent payable over 27 years to a figure that can be compared correctly to the purchase price of Lm6.5 million. (Taking a discount rate of five per cent annually, to pay Lm100 payable in a year's time one has to provide Lm95 today).

Such an analysis, which would also take into account today's approximate value of the resale estimate 27 years on, might well indicate that buying makes more long-term sense than renting. But do supply some hard evidence, gentlemen.

Otherwise the perception that, when times are so tight, the purchase was an extravaganza, will linger. Rumour already has it that the new PM, when he entered the room at the top and was briefed about the building, discovered that he was lumbered with a done deal. He owes it to himself, apart from to the rest of us, to give the detailed reasoning that led to the deal.