Securing our future

In a world where change is the order of the day, insecurity is possibly the most natural feeling. As humans we are generally afraid of change, even when this is for the better. Therefore, instilling a sense of national security is no easy task. This year's pre-budget document seeks to address this fundamental challenge. We are confident that as we have managed to overcome so many other fundamental challenges we will also give our people this prospect of security.

We are moving in the right direction.

Having anchored ourselves to the second most prosperous economy in the world, initiated the process of adopting the euro as our currency and addressed a number of critical challenges with a good measure of success, we are confident we can move ahead.

We have put the country's finances back to sustainable levels, increased our attractiveness for further investment, both local and foreign, and through a number of reforms in both the public sector and the economy re-generated our growth prospects following an international period of slowdown that also impacted our performance.

We have addressed also other important issues of sustainability, not only financial through the pension reform underway, but also in a number of other fronts including in the educational sector, social policy, health and the environment.

We can only guarantee a secure future if we continue to successfully addressing the key factors that can undermine our security. This is what this year's pre-budget document attempts to achieve. It delves into some very important themes, including the need to continue fostering a society that is both inclusive and cohesive. This we can only achieve if our social welfare programmes are really targeted toward those in real need of support, our educational system is sufficiently effective in ensuring the best possible at whatever stage of one's life and a health system that can support our future needs.

The document also gives an important focus on the socio-economic development of Gozo. The numerous initiatives tailored for Gozo, and proposed in this document, emerged following a detailed analysis of the present state of development of our sister island and the opportunities it can tap to create the jobs and economic activity that can also give a secure future to Gozo.

Without any doubt, many will be those keen to analyse the assessment and conclusions reached by the Tax Reform Commission. Some interesting results have emerged that go long way in answering a number of misconceptions about the level and friendliness of our tax systems.

Taxation on labour (that is, income tax and NI contributions) is among the lowest in EU at 12.2 per cent of GDP compared to the 18.5 per cent of GDP average in the EU25. Social security contributions in Malta account to 6.9 per cent of GDP, less then half the 13 per cent average in the EU25.

In the case of company taxation, the conclusions urge the government to retain the present system both in terms of rates and mechanisms as these give us certain advantages that other systems in the EU don't. It is important to note that in terms of rates, Malta's company tax system is eighth lowest in the EU. Although a number of changes are being proposed, these are intended to sustain the prospects of the growing financial services industry and remain attractive in terms of foreign direct investment.

Through the pre-budget document, the government also presents a number of options for consideration and which it sees implementing over the coming two to three years. These include movement in tax bands to incentivise people to work and earn more, changes in the part-times status with regard to National Insurance contributions, measures attractive to the self employed, reducing the departure tax and others.

These are however being presented in a context of a responsible government that will remain consonant with its responsibility of not jeopardising the achievements we have made over the past years by placing national finances on a sound footing. Therefore, it needs to be made clear that the measures presented are competing measures because the room for financial manoeuvrability that our projections for 2007 seem to allow us are in the region of Lm 8 million. We hope that the consultation process will lead to healthy debate on which measures should be given priority in the coming budget.

Other important themes found in this document include the launching of a number of proposals for an industry policy that includes both manufacturing and services such as tourism. There are also two important documents, the first dealing with the government's strategy on research and innovation and the other on renewable energy.

Next year's budget will also be strongly influenced by the EU funding and the fact that this budget will prepare Malta for the adoption of the euro, another important achievement in this country's socio-economic development.

To secure our future requires a long term vision, a vision that this government is not only sharing but, more importantly, desiring everyone's participation in its formulation. Through everyone's participation we can secure our future together.

Mr Fenech is Parliamentary Secretary in the Ministry of Finance.