Smoothing must benefit consumers - government

The government has instructed all its entities and agencies - which include Air Malta, the Water Services Corporation and local councils - that any smoothing carried out to prices when Malta switches to euro must be in favour of the consumer, according to sources close to the Ministry of Finance.

In a circular issued to the agencies and departments, the ministry also states that smoothing - the process of changing an awkward number to a more memorable one - will only be permitted by the ministry in exceptional circumstances, to ensure prices remain the same as they are today.

The sources said: "The government is leading by example... it is also sending a message to businesses that no one has any reason to change a price. The government expects private enterprise to follow suit".

The ministry's circular states that a straight conversion should be preferred over anything else and there will be no automatic smoothing of amounts.

"Smoothing will be allowed in certain exceptional cases where it is ascertained that a solid business case for such smoothing exists for easier memorisation and familiarity by the consumer."

To be able to carry out smoothing, government departments or entities must present a convincing business argument to the ministry. Exceptions will be considered in the case of cash transactions, fines or licences with easily memorised figures, and thresholds for tax bands.

However, the circular rules out instances where smoothing can be carried out, such as rates and fees paid by the government, as well as salaries, pensions and other benefits.

All decisions taken by the ministry in relation to smoothing will be made by June 15.

Earlier this month, the government announced that there will be a tax deduction on expenses incurred for the euro changeover.

The incentive is on specific items, including cash registers, weighing scales, and modifications to computer systems, incurred between January 1, 2006, and the end of 2007.

Prime Minister Lawrence Gonzi and Parliamentary Secretary Tonio Fenech formally submitted Malta's application to join the euro in Brussels on February 27.

The application must pass through various stages within the European Commission and the European Central Bank before a final decision on whether Malta can join by January 1 is taken by the Council of Ministers in June.