Pre-budget deliberations (3)

The third and final part of the article deals with the other reforms proposed in the pre-budget document and which need to be implemented in the near future.

Incentives for funded pension scheme contributions
The government is in the process of enacting the pension reform system. Complementing this initiative could be a reinforcement of the initiatives available to individuals who opt for a voluntary-funded pension scheme. This would also lead to macroeconomic stability as it induces an overall higher rate of saving.

These considerations also emerge from previous government documents that outline a cautious way forward.

The Chamber of Commerce and Enterprise notes the proposed incentives for funded pension scheme contributions as outlined in the pre-budget document, and agrees with the cautious approach being taken.

The chamber, together with the other kindred organisations, have previously cautioned for a vigilant approach with regard to pension and health reform.

Incentives on properties rented to the Housing Authority
The chamber noted the proposals in terms of "Incentives for landlords to rent property for social housing". The Chamber was hardly surprised at the low response for the Housing Authority scheme introduced in March 2005. The Chamber senses that even the government's considerations of other tax incentives to make the scheme more attractive to landlords will not have the desired effect unless it is complemented by the much-awaited review of rent laws for pre-1995 rental agreements. The review of the pre-1995 rental law is now long overdue.

The first urgent change sought is the removal of the so-called "security of tenure" practice that offers protection not only to the incumbent tenants but also to relatives of tenants, in particular those who "abusively" move into premises in the twilight of their relatives' lives in order to "inherit" favourable rental conditions. The second is liberalisation of pre-1995 residential rents.

The chamber continues to propose that a formula acceptable to all parties be devised with a view to hasten the liberalisation process. The injustice inflicted by the current system should not be overlooked especially in cases where the tenants are more affluent than the landlord.

Besides, as the law stands, the landlord is also obliged to finance any maintenance works required in rented properties at current prices and not at 1939 prices. The chamber also urges the government to at least liberalise the commercial rents, granting the right of first refusal to incumbents.

Conclusion
Besides the legal and technical aspects, the chamber believes that within any reform there is also scope and need for regulatory improvements.

The chamber maintains that regulation and enforcement are necessary to ensure that all taxes due are collected as well as a level playing field insofar as tax compliance goes. Nevertheless, a recent survey conducted by the chamber revealed that entrepreneurs felt that tax enforcement was often uneven and selective and that it was too strict. Others lamented that there was a lack of effective sanctions for compliance. This second outcome reflected a sense of frustration among a section of organised and law-abiding entrepreneurs.

While they go through great pains and costs to comply, they sense that their direct competitors operate with impunity despite not being registered with the relevant authorities and, consequently, not complying with their administrative and fiscal responsibilities.

This could be a reflection of the fact that certain authorities and regulators are under-staffed and lack certain competencies. The same authorities, regulators and departments cannot be pro-active.

This same thing applies to tourism and other areas of the economy, where justice not only needs to be done but is also needed to be seen being done.

The chamber earnestly hopes these considerations are given due weight in the forthcoming budget. This is what we, as people in business, are saying should be on the country's agenda. After all, it is business and the people in business that provide the nation's wealth.

Mr Galea is president of the Malta Chamber of Commerce and Enterprise.