Editorial

There would seem to be no end to the number of taxes citizens are made to pay. People everywhere complain of ever-rising taxes and increasing difficulties to make both ends meet. It is normally the government, or if one lives in England, for example, the councils, that get most of the flak for the money consumers have to dig out of their pockets for services. The situation in Malta is no different to that found in so many other countries. Had the country found oil in commercial quantities, the situation would have been different but, since the prospect of finding oil is still very much in the air, the government of the day would still have to rely on the collection of taxes to keep the state going.

One Nationalist Party promise before the election was a cut in income tax but, with the international economic situation becoming more uncertain in the wake of the rising prices of oil and food, it seems it is having second thoughts about this, at least at this stage. Or is it? Only up to some weeks ago, the government appeared anxious to move ahead with its plans to cut income tax in an effort to spur economic growth. The argument ran that once the government was now close to balance the budget, it could, in the words of the Finance Minister, use fiscal policy to spur more economic growth. One proposal was for income tax to be cut from 35 per cent to 25 per cent for those earning less than €60,000.

In truth, the tax burden is rarely out of the picture in politics, with politicians insisting, quite rightly, that the money to run hospitals and services and to pay social benefits, had to come from somewhere. However, only the other day, figures released by the EU statistical agency, Eurostat, showed that Malta registered the second highest tax burden increase among the 27 EU member states over the past 10 years. This is no music to the ears of Maltese consumers who have just had the water and energy surcharge raised from 50 per cent to 95 per cent, which comes on top of the rise in the price of fuel at the pump and, also, the increase in prices of food.

According to Eurostat, Malta's tax burden rose from 25.4 per cent of gross domestic product in 1996 to 33.8 per cent in 2006. Cyprus registered a rise, too. The fact that the tax burden in Malta is lighter than in other EU countries is of little consolation as the standard of living here is lower than in most of the advanced countries in the EU. An average EU citizen is 23 per cent wealthier than a Maltese citizen. Even Cyprus, which joined the EU at the same time as Malta, and Slovenia and the Czech Republic are richer than Malta.

Generating greater economic activity through new investment will help raise additional revenue. However, for the country to be able to attract new direct foreign investment, particularly in lines requiring a high value-added content, it is important for the island to remain competitive.

With costs rising so fast, this is easier said than done. Greater efficiency and less waste will also help cut unnecessary expenditure in the running of state services.