The Parliamentary Secretary at the Finance Ministry, Tonio Fenech, said yesterday he could not divulge the workings behind the PN's proposal to overhaul the income tax bands "to avoid them being copied by our opposition and include them as their own proposals".
The measure was announced by Prime Minister Lawrence Gonzi on Tuesday morning.
A new Nationalist government, he said, will further widen the tax bands, raising the minimum taxable income and reducing the maximum tax rate from 35 per cent to 25 per cent, except for those with a declared income in excess of €60,000 (Lm25,758).
Economists who spoke to The Times yesterday concurred on the need for such proposals to be assessed in the light of their feasibility. However, when asked for the workings the government declined.
"You will appreciate we are now not working on a pre-budget document but are in an electoral campaign. Our performance and achievements attest to our credibility," Mr Fenech said in justifying his refusal to publish the workings.
He insisted, nonetheless, that the proposal was based on studies carried out by the tax reform commission to support the cuts introduced in the 2007 and 2008 budgets, a point repeated independently by the director general of the Chamber for Small and Medium Enterprises - GRTU, Vince Farrugia.
Mr Fenech explained that the proposed measure may not be implemented in one go but is likely to be introduced progressively over the next legislature, so as "not to jeopardise other important objectives, such as reaching a budget surplus by 2010".
Faced with the criticism his party levelled at Labour for failing to justify its proposals in the past months, he insisted there was no comparison with Labour's equally-untested promise to halve the surcharge on utilities. In the 2007 and 2008 budgets the government had already shown that such cuts could boost the economy and improve revenue.
"Clearly there is a complete distinction between the Labour proposals and ours. The Labour Party's proposal to halve the surcharge does not really favour growth as the MLP was saying," Mr Fenech said, "but simply favours high energy consumers and penalises people who are judicious with their consumption or have taken steps to switch to alternative sources".
The GRTU, which has been lobbying for such cuts for the past years, has welcomed the proposals, pointing out that the Prime Minister had indicated to the GRTU that the government had intended to follow up the trend it started in 2007 in future budgets.
"We should not fear to let go... unless we do so we will not encourage the motors in the middle earning brackets to go ahead and develop further," Mr Farrugia said, pointing out that a debate on the feasibility of such tax cuts had been carried out by the GRTU and presented to the government in pre-budget discussions.
He did point out, however, that the GRTU's studies focused solely on the tax cuts and took into account the present economic situation. "If you start factoring in the grand projects the parties are promising and other such capital expenditure, well in that case I cannot really comment if it will be sustainable. Clearly you cannot have it all."
The president of the Malta Chamber of Commerce and Enterprise, Tancred Tabone, also welcomed the PN's tax proposals.
"Primarily, this measure will serve to increase purchasing power across the board thereby promising to stimulate the economy. Dr Gonzi said that this measure would be sustainable in the medium-term through the same added economic stimulation it would bring about. Besides, this measure is also beneficial to national competitiveness as it is conducive towards containing wage inflation pressures," Mr Tabone said.
A number of economists contacted yesterday similarly had favourable comments on the principle of cutting tax to boost the economy but cautioned against a contest between the two main parties of pre-electoral promises, stressing the need to maintain the sustainability of the country's finances particularly as the international economy becomes increasingly volatile.