Chamber wants fiscal consolidation with caution

The Malta Chamber of Commerce, Industry and Enterprise is advocating fiscal consolidation “with utmost caution” as the government prepares to present its Budget.

It emphasises that although some economic expansion has been registered post-recession this has not translated in sustainable profit margins.

“Consolidation must bring about no economic shocks resulting from over-ambitious measures to collect tax and/or negative multiplier effects from any public spending cuts,” it said.

“The situation is still volatile,” it added.

The Chamber stressed that rationalisation must come about primarily through the elimination of abuse and a clampdown on evasion, adding that few concrete measures have been taken to combat evasion besides the granting of amnesties – which it “completely” disagrees with.

It said systems of taxation and social benefits must encourage people to work and increase people’s employability. “The social welfare model must be sustained and protected through work,” it said.

The Chamber said it was unhappy with the situation of utility rates being based on full cost recovery for the energy provider “given that there are no assurances on the efficiency of operations of this monopolistic structure.”

It said the authorities must address this situation with urgency through investment in more cost-effective methods of power generation and interconnectivity with the European grid “as the Chamber has been proposing since 2008”.

The Chamber said it was not against COLA and this should be retained as an instrument to compensate workers for loss of disposable income.

“But we insist that the mechanism must be fine-tuned with a focus on ascertaining Malta’s competitiveness. We are extremely disappointed that we are facing yet another Budget without a review of the COLA mechanism,” it said.

It said COLA must be calculated according to sectoral GDP figures to ensure it is linked to productivity and in line with what that particular sector can afford. It also suggested that the effect of COLA be mitigated by labour flexibility measures such as the banking hours.

The public service must align itself to the present needs of the economy and the private sector, the Chamber insisted, saying that practical examples of added costs caused by bureaucracy include half days, ARMS Ltd., Enemalta, EU funds and grants, court delays and Mepa.

In most cases, it said, the losses to the economy from bureaucracy involve employment income, value added, the multiplier effect of foregone earnings, missed opportunities, government taxation revenues and the balance of trade.

The Chamber said the environment is the backbone of the country’s future well-being and put forward a number of re­-com­­-mendations including the reduction of industrial rents for companies showing environmental excellence and incentivising the use of electric and hybrid cars.

It said the need for economic growth should be embraced at the centre of the decision making process.