Prime Minister Lawrence Gonzi told Parliament yesterday that at present the government was not in favour of reducing VAT on tourist services to protect and create employment, but emphasised it was keeping all options open.

Dr Gonzi was answering questions by Opposition Leader Joseph Muscat after the Prime Minister had made a statement on his attendance at the EU summit last month and his talks in Sweden, Lithuania and Estonia.

Dr Muscat asked whether the government had arrived at any conclusion after its analysis on reducing VAT on tourist services.

Dr Gonzi declared from the outset that there were many unknowns in the country's economic outlook in what he termed as "a season full of challenges". And any decision whether to give preferential treatment on VAT for catering and tourist establishments had to be taken in this light. The scenario was difficult but, the Prime Minister said, he was optimistic.

Tourist arrivals during the first five months of the year had kept the same levels as 2007, which was a record year. But, Dr Gonzi pointed out, one must still see whether the numbers translated in the same net return for the economy.

The government was exploring all expectations in its pre-Budget discussions.

Dr Gonzi said that last week he had had positive initial pre-budget meetings with the MCESD and the Gozo regional economic development council, during which tourism had also been discussed.

The government's attitude had to be based on the country's resources and how to find solutions that did not necessitate more taxes. More detailed analysis and technical studies of the economy and of the tourist sector in particular were needed. Strategic decisions to be taken had to consider the benefit to the country and not to others.

On the issue of illegal immigration, Dr Gonzi said that Lithuania and Estonia had not made any commitment on taking on a number of illegal immigrants, but were supporting Malta's application to host the headquarters of the asylum agency. Lithuania had taken a small number of illegal immigrants some time ago after a Lithuanian parliamentary delegation had visited Malta.

The Swedish Presidency and other countries were also supporting the European Council's pilot project in Malta for voluntary measures for the internal reallocation of beneficiaries of international protection.

The Prime Minister showed his appreciation to the French government's decision to take from Malta 99 refugees and persons enjoying humanitarian status this year. It had also promised to take 80 more adults and 20 children in 2010.

The French government was sending a strong message of solidarity with Malta to the European community, he declared.

The Prime Minister told the House that the European Council had acknowledged Malta's stand to repatriate illegal immigrants who did not enjoy refugee, humanitarian or subsidiary status.

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