PM holds out on VAT

Prime Minister Lawrence Gonzi told Parliament yesterday that Malta was ready to discuss a proposal within the EU for reduced VAT rates on labour-intensive manufacturing industries, on condition that such rates would also include pharmaceuticals and food. He said that no agreement had been reached because Malta continued to maintain its strong position to keep its reduced VAT rate on food and medicines.

Dr Gonzi, who was answering opposition questions on a statement he had just made on the EU summit held last week, said that a final decision would be taken next March during a meeting of EU finance ministers. Malta would cooperate and contribute towards a solution on the Irish referendum issue. A positive result in Ireland would lead to the ratification of the Lisbon treaty.

On questions dealing with the energy sector, the Prime Minister said that the government was ready to invest to reach targets in controlling emissions and providing other sources of alternative energy.

On relaunching the economy as discussed in the EU summit he said that the government had projected a capital investment expenditure which went beyond the 1.5 per cent mark.

The government was closely following the automobile manufacturing sector in Malta because of the crisis in the US and European markets. He added that there were factories in Malta which totally depended on this market.

The government was also following the tourism sector closely because its success depended on what happened to the British, German and Italian economies, among other factors. Malta could benefit from economic incentives in these countries.

Referring to state aid with particular attention to Gozo, Dr Gonzi said that the EU had changed the de minimis regulations. This was advantageous to Malta because it permitted the possibility of better investment in Gozo. The budget had shown that the government was committed to helping the self-employed and creating employment.

The Prime Minister also spoke about the projected windfarm at Is-Sikka l-Bajda. Although various studies had been concluded, other technical studies remained to be done. These included studies on the environmental impact and another on the force of winds in the area. He added that Malta needed a large windfarm that could generate electricity which could be sold in Malta and in neighbouring Sicily. It was therefore crucial for Malta to invest in the electricity cable joining Malta to the European electricity grid. This would address one of the major energy security problems in the Maltese manufacturing sectors because investors would know that Malta had enough electricity supply.

Dr Gonzi also referred to solar and photovoltaic projects, declaring that 15 government projects were under way. Among these projects there was a school in Pembroke which was to get its electricity supply through the photovoltaic system.

The government was determined to reward those households which took measures to reduce energy wastage. On emission training schemes Malta together with the other EU countries was bound to apply the polluter-pays principle.

In reply to questions on the sixth seat for Malta in the European Parliament, the Prime Minister said that as a result of initiatives taken by Malta and Spain, Malta could get its sixth seat before 2014 if the Lisbon treaty was ratified after the European elections next June. He also said that each country was to retain its European Commissioner.

Dr Gonzi also referred to the City Gate project, claiming that the investment would be spread over a four-year period. The government would insist with Mepa to speed up the procedures so that the project would get under way.

He said that EU regulations on international tenders were being relaxed in that the calls for tender were to be closed in 30 days' instead of 78 days' time. Because of international tenders which had to be issued, certain reports and studies would be published at the right moment. The government had to quicken the pace on investment for sewage treatment, for the construction of roads and schools, for better beaches and for a better product in the tourist zones.

While it was important to encourage and have trust in the people, reforms had to continue to make the country competitive.

In conclusion, the Prime Minister said that one of the issues in the EU summit had been the request to reduce the VAT rate on labour-intensive manufacture. Malta retained its position that the reduction of the VAT rate had to include food and pharmaceutical products. Malta wanted a derogation as part of the whole package, but agreement had not yet been reached. Discussion was still on the table and a final decision would probably have to be taken in March.