The Malta Employers' Association is recommending a reduction in income taxes in next week's budget "to the point where tax revenue is maximised" but even if the fiscal deficit deteriorates as a result.
In its proposals for the budget the MEA said income tax reductions in the previous two years resulted in increased revenues because more income was declared, the increase in disposable income contributed to more spending and increased VAT revenues and more people were incentivised to work and the economy was sufficiently competitive to generate jobs.
"Even if the reduction in tax rates results in a marginal and controlled deterioration in the fiscal deficit, under current circumstances it would be a better option to postpone the balanced budget target by a couple of years than to risk an economic slowdown, especially in view of the global crisis. The fiscal priority for the next national budget should be to keep the economy stable and running," the MEA said.
MEA director-general Joseph Farrugia told The Times Business that given the economic climate the government risked an economic slowdown if it chose not to introduce tax cuts and this "would probably result in a worsening of the deficit anyway". He said the last thing the country needed right now was an economic slowdown.
"Governments in major developed countries are pumping money into the economy to restore business and consumer confidence. Under current circumstances, the thrust of this budget should follow the same lines in order to stimulate the economy.
"At the same time, the government should persist in its efforts to cut down on public expenditure in specific areas to make up for the expected increase in spending in health and education," the MEA said.
The MEA also called for the current rate of corporate tax to be reduced from 35 per cent to 30 per cent. Employers further called on the government to use fiscal measures to widen the gap between wages and social benefits and to persist in its efforts to curb the abuse of such benefits. "One measure that should be put in force is to introduce a community work scheme for long-term unemployed people. This will curb abuse and introduce the principle of giving something back to society when a person is living off taxpayers' funds," the MEA said.
The MEA said the welfare state is generous when compared to what persons are paid when they take up legitimate employment and contributes to the low participation rate and to the black economy.
It said this year's enhanced COLA increase given in anticipation of inflation should "definitely not be repeated". The MEA said COLA increases should be applicable only to employees earning less than €160 a week. The association said rent reform should take place in 2009 and the government should fine-tune the recommendations for commercial rentals to reflect the complexities of this segment.
The MEA also said employers do not have a clear direction how to claim the 14th week paid maternity leave from social security contributions, and called on the government to clarify the mechanism for its implementation.
It also called for increased incentives to consumers and industry to adopt alternative energy and for standards to be set for the construction industry to make buildings more energy-efficient. It said the government should investigate the benefits of joining the electricity grid, rather than invest in power stations, to increase electricity supply.
The MEA said many companies have expressed disappointment at the outcome of the port reforms and claim that the reduction in costs was marginal at best. "The government should investigate how port charges can be reduced to improve competitiveness," it said.
In its proposals for the budget the MEA said income tax reductions in the previous two years resulted in increased revenues because more income was declared, the increase in disposable income contributed to more spending and increased VAT revenues and more people were incentivised to work and the economy was sufficiently competitive to generate jobs.
"Even if the reduction in tax rates results in a marginal and controlled deterioration in the fiscal deficit, under current circumstances it would be a better option to postpone the balanced budget target by a couple of years than to risk an economic slowdown, especially in view of the global crisis. The fiscal priority for the next national budget should be to keep the economy stable and running," the MEA said.
MEA director-general Joseph Farrugia told The Times Business that given the economic climate the government risked an economic slowdown if it chose not to introduce tax cuts and this "would probably result in a worsening of the deficit anyway". He said the last thing the country needed right now was an economic slowdown.
"Governments in major developed countries are pumping money into the economy to restore business and consumer confidence. Under current circumstances, the thrust of this budget should follow the same lines in order to stimulate the economy.
"At the same time, the government should persist in its efforts to cut down on public expenditure in specific areas to make up for the expected increase in spending in health and education," the MEA said.
The MEA also called for the current rate of corporate tax to be reduced from 35 per cent to 30 per cent. Employers further called on the government to use fiscal measures to widen the gap between wages and social benefits and to persist in its efforts to curb the abuse of such benefits. "One measure that should be put in force is to introduce a community work scheme for long-term unemployed people. This will curb abuse and introduce the principle of giving something back to society when a person is living off taxpayers' funds," the MEA said.
The MEA said the welfare state is generous when compared to what persons are paid when they take up legitimate employment and contributes to the low participation rate and to the black economy.
It said this year's enhanced COLA increase given in anticipation of inflation should "definitely not be repeated". The MEA said COLA increases should be applicable only to employees earning less than €160 a week. The association said rent reform should take place in 2009 and the government should fine-tune the recommendations for commercial rentals to reflect the complexities of this segment.
The MEA also said employers do not have a clear direction how to claim the 14th week paid maternity leave from social security contributions, and called on the government to clarify the mechanism for its implementation.
It also called for increased incentives to consumers and industry to adopt alternative energy and for standards to be set for the construction industry to make buildings more energy-efficient. It said the government should investigate the benefits of joining the electricity grid, rather than invest in power stations, to increase electricity supply.
The MEA said many companies have expressed disappointment at the outcome of the port reforms and claim that the reduction in costs was marginal at best. "The government should investigate how port charges can be reduced to improve competitiveness," it said.