Yes, Malta really can

Last Monday I called upon the President and asked him to dissolve Parliament and call an election for March 8.

As The Sunday Times' sister newspaper aptly put it last Tuesday, the race is now on. I look forward to an election campaign that is clean and dignified, becoming of a modern civilised democracy.

As a voter, you will be called upon to pass judgment on my performance as Prime Minister and to decide how you would like to see the country governed for the next five years.

Some people may argue that now we are in the EU, it is no longer relevant which party governs the country as there is no major difference between the two main parties. I beg to differ. There is still a stark choice to make. It is a choice on which party you trust most to lead the country into the future.

Allow me to state my case:

The election will take place in the context of an international economic scenario where grey clouds are gathering. The economic crisis in the US threatens to affect the global economy on which we depend for our livelihood.

There are also other challenges coming from the ever rising price of oil and the recent surge in world prices of staple food commodities. We are not immune to any of these and your vote will determine how Malta will meet the coming challenges.

The main electoral platform of the Labour Party lies in its pledge to halve the surcharge on water and electricity bills. This proposal is flawed, not only because it is not sustainable, but principally because it does not help us face the challenges confronting our country.

It is one thing supporting families with a subsidy on the surcharge. We already subsidise the surcharge for all families and shoulder it almost completely for some 30,000 families who are in need. In fact, today's water and electricity bills, surcharge and all, are lower than those announced by then Prime Minister Alfred Sant in November 1997.

It is quite another thing, however, to do what Labour is pledging and give all and sundry the false impression that someone, somewhere, will pay the country's fuel bill regardless of its real cost. This is a myth. If you do not pay for the increased cost of fuel in your bill, you will pay for it in other taxes. Labour's proposal also penalises those who are careful with their consumption of water and electricity by making them pay, through their taxes, to subsidise all those who waste.

What is needed now is for the country's resources to be directed where they are most needed, that is, to boost the economy, to make work pay and to enable the country to prepare for the challenges before it.

In the first week of the campaign, in line with calls from institutions like the International Monetary Fund (IMF), I presented a package which does not throw money at problems but invests money where it can best produce results. This package is aimed at boosting economic growth, generating business and making work pay. It targets workers, but it also targets the self-employed, the small traders and SMEs which are the motors of economic growth.

Firstly, a commitment to achieve a budget surplus by 2010. This means that we remain firmly committed to sound public finances where the state absorbs only what is required to carry out its obligations.

Secondly, a package of tax incentives.

The first incentive is a revision of tax bands to enable people to pay less income tax. We propose to do this by raising the thresholds of the 15 per cent and 25 per cent income tax rates, thereby widening the group of wage earners who pay zero income tax, and moving others out of the 25 per cent bracket and into the 15 per cent bracket.

The second incentive proposes to reduce the maximum tax rate from 35 per cent to 25 per cent for income up to €60,000 (Lm25,758). This is a bold measure which seeks to reduce the 35 per cent tax rate for the first time since the PN Government slashed the 65 per cent tax rate to 35 per cent in the early 1990s.

These incentives are estimated to cost the exchequer €46 million (Lm19.75 million). But because they will generate growth and make work pay, they will also generate more tax revenue and will therefore pay for themselves within the second year of their introduction.

Over the past two years we have already reduced income tax twice in a row. Yet tax revenues have gone up, for the simple reason that the economy has responded positively to these types of incentive.

The third incentive is no less important. The number of people in full-time employment is at the highest level ever. But we know that there are women who wish to work but face disincentives when deciding whether to do so or not. This is one of the reasons why the level of female participation in Malta remains low.

Three years ago we introduced a one-year tax break for all women who return to work after an absence of five years. Now we are proposing to take this further. For women who return to work, we are proposing a one year income tax break for each child. Women with two children will get two years tax free, those with three will get three years and so on. The same incentive will also apply to all mothers of children born in or after 2007 who continue to work.

Finally, on overtime, we propose to retain overtime pay at current rates. And since most workers who work overtime are, in any case, within relatively low income brackets, their tax treatment will also be more favourable than it is today.

These are our key proposals to further unleash the potential of our economy. They are bold proposals made at an important juncture in the development of our economy and in the light of the current international situation. There has been an overwhelmingly positive response to these incentives from constituted bodies, trade unions and the public at large.

Our rallying cry during this election is that together, as a country, we can make all things possible. Together, yes, we really can.