‘Wrong time’ to lower the rate of income tax
Lowering the income tax rate to25 per cent “would not be prudent” given ongoing economic uncertainty across Europe, Prime Minister Lawrence Gonzi said yesterday.
Speaking on Radio 101, Dr Gonzi said that although he believed the lower rate should be introduced eventually, the upcoming Budget was probably not the best time to do so.
“Look around us. Socialist governments, like that of Francois Hollande in France, are raising taxes. We don’t agree with that strategy but we have to ensure sustainability,” he said.
The Prime Minister has had to field questions about lowering income tax throughout this legislature following an electoral pledge to cut rates made before the international economic turmoil began in earnest.
Although economic statistics last week showed that Malta was officially out of recession, Dr Gonzi cautioned that it would be some time yet – “maybe four or five years for EU economies and perhaps a decade for the entire crisis” – for its effects to be overcome.
That notwithstanding, Malta was doing well in comparison to many other countries.
News of GDP growth, increased employment figures, record tourist arrivals in July and an unchanged A3 negative out-look from ratings agency Moody’s was further confirmation, Dr Gonzi added.
“The Labour Party’s been constantly saying that Malta’s running into a brick economic wall but (last) week’s economic news discredits that.”
The PL immediately shot back, saying Dr Gonzi was reading statistics back to front.
“Today, the Prime Minister said that unemployment was decreasing. Perhaps his consultants haven’t yet informed him that, according to Eurostat, unemployment rose from 5.8 per cent in April to 6.3 per cent in July,” the party said.
Dr Gonzi mocked the Labour Party slogan Futur Li Jgħaqqadna (A Unifying Future), saying the tagline was “pretty rich coming from a party that’s spent the past four years trying to divide us”.
He then waved off suggestions that ongoing strife within the Nationalist Party, with MP Franco Debono now threatening to table a motion of no-confidence in Health Minister Joe Cassar, could be damaging the country.
“Of course, I’m concerned – very concerned – about internal party problems. But the country’s moved forward and that’s what interests people.”
Dr Gonzi also insisted that the draft Cohabitation Bill did what was intended: ensure that both parties to a relationship had some legal protection.
The draft Bill has been staunchly criticised by equal rights activists for not putting cohabitation on a legal par with marriage.
“This Bill is about cohabitation, not marriage. Let’s set the controversy aside and work to ensure all cohabiting couples have rights and obligations.”
He reminisced about going abroad with recently deceased former Prime Minister Dom Mintoff in the early 1990s and made a veiled appeal to moderation in political discourse.
“I had respect for him and he had respect for me because, although we disagreed, we both knew that each was doing what they thought best for the country.”
But that did not change the fact that many of Mr Mintoff’s policies were bad for Malta, Dr Gonzi noted.
The Prime Minister also spoke briefly about Stephen Brincat, the former head of Mater Dei Hospital’s Oncology Department, who resigned two weeks ago.
“I have a huge amount of respect for Prof. Brincat and defer to his medical knowledge.
“But we didn’t agree on administrative matters.”
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Guido Farrugia
Sep 10th 2012, 18:52
Francoise Hollande also lowered his and cabinet members' salaries with immediate effect.
william cauchi
Sep 10th 2012, 18:22
35%, 25% whatever.
What really counts are the threshold levels. Why should the threshold from which you start paying tax in Malta be so low, ultra low in fact. In Malta you start paying tax from an income of €11,900 per couple. In most Western European countries this would be considered below the bread line and pay no income tax.
In a Country like Ireland where the economy is not doing too well, they are making big sacrifices and have reduced the threshold level from which they start paying tax from €71,800 to €65,600. If the Irish are poor, what are we?
How many of us effectively have such an income. With the same threshold level in Malta as in Ireland, 90% of the working population would pay NO income tax at all. If the Irish are making big sacrifices, what are we making???
So who cares if it's 25% or 35%, increase those threshold levels. The rest is just PAROLI, PAROLI.
X Borg
Sep 10th 2012, 21:51
If these Irish figures are correct then we are very underpaid and very over taxed.
Mr Jamie Frendo
Sep 10th 2012, 16:29
At the moment anyone earning a slightly decent wage is hit with the 35% the same way as the people earning 6 figure salaries are doing and 20 000 is not a bad wage but it's not a wage that should be in the millionair's same tax bracket of 35%. Give someone a chance to keep some of the hard earned cash they should be bringing home.
B. Cachia
Sep 10th 2012, 16:06
This is topsy-turvy economics. If it is a time of economic difficulties, then an income tax cut is the thing to do in order to provide a supply-side boost to the economy. And if the economy does well, there is no need to fear a deterioration of public finances. Our Eastern European partners have cut their income tax and corporation tax to levels far lower than ours, and are prospering economically. Greece, Spain and Italy have high income tax rates but it's not helping them. You can't collect taxes on economic activity that you have stifled.
E. Azzopardi
Sep 10th 2012, 14:46
Totally agree. Do we want to become like Greece or Spain in two or three years time? It makes sense.
And to those opposing: Open your minds.
B. Cachia
Sep 10th 2012, 16:14
@ E. Azzopardi: Greece and Spain have high rates of income tax, and it's not helping them. High income tax rates stifle economic activity and ultimately impair the government's ability to raise revenue.
There is not a single economist on the government benches at the moment, and it really shows. The economy is instead being run by two individuals who happen to be a lawyer and an accountant by training and who have heads as hard as stone. Not exactly an ideal situation.
B. Cachia
Sep 10th 2012, 16:19
@ E. Azzopardi: Greece and Spain have high income tax rates and it's not helping them. Their high income tax rates are in fact depressing economic activity and worsening their fiscal situation.
Unfortunately, there's not a single economist on the government benches at the moment and it shows. The economy's being run instead by a lawyer and an accountant, both of them having a reputation for being all-knowing and hard-headed. Not exactly an ideal situation.
Mr Andrew Camilleri
Sep 10th 2012, 17:48
E. Azzopardi: can you please clarify your economic theory as this contradicts what George Bonello duPuis exactly did in the 1980's to stimulate the economy - he lowered income tax from 60% to 35%.
aldo Attard
Sep 10th 2012, 14:40
During all these years, every instance when there was a wage increase to counter act for the cost of living,
If there was not also an income tax adjustment for that year, actually the result would be an increase in more taxes.
Therefore besides vat, licenses, postages, services etc, etc, etc, our direct taxes have been on the increase and are paid through our noses; included but not only are those who have a wage, salary or a pension.
No wonder many are finding it much difficult to make ends meet.
Politics excluded.
Mr J Xerri
Sep 10th 2012, 13:45
Four years+ after promising to lower income tax, we are now told that it is the ‘Wrong time’ to lower the rate of income tax." Meanwhile this same Prime Minister and his media regularly take to task the Opposition leader for making promises which, according to them, Dr Muscat would not be able to keep.
charles tabone
Sep 10th 2012, 12:14
Oh, yes. Dr Gonzi. You are always correct, infallible as long as you find the gullible like all those who voted PN aa they swallowed the income tax bait in 2008.
John L Galea
Sep 10th 2012, 12:10
But was the €500 raise/week he gave himself and to his core ministers given in the appropriate moment? Two ways two measures.
Dr Gonzi mocked the Labour Party slogan Futur Li Jgħaqqadna (A Unifying Future), saying the tagline was “pretty rich coming from a party that’s spent the past four years trying to divide us” - GOnzi's such a clown!! He blames he PL of his party's internal rift...what a joker!! hahahaha
aldo Attard
Sep 10th 2012, 11:13
During all these years, every instance when there was a wage increase to counter act for the cost of living,
If there was not also an income tax adjustment for that year, actually the result would be an increase in more taxes.
Therefore besides vat, licenses, postages, services etc, etc, etc, our direct taxes have been on the increase and are paid through our noses; included but not only are those who have a wage, salary or a pension.
No wonder many are finding it much difficult to make ends meet.
Politics excluded.
Joe Deguara
Sep 10th 2012, 10:25
I would argue that it is exactly the right time to lower taxes while others around us raise them . Would this not make us a more attractive place to invest, and by default give a much needed boost to our economy?
S. Attard
Sep 10th 2012, 10:20
"It's wrong time to lower rate of income tax". - P.M. But it was right time to ( a) increase the Minister's and Parliamentary Secretaries by 500 euros per annum: (b) it was right time to appoint a number of assistant Parliamentary Secretaries with good salaries + M>P.'s honoraria (c) It was right time to increase the salaries of the judicial staff' (d) right time to organise festivities just to celebrate projects, even minor ones; (e) right time to increase drastically pensins of certain categories of employees; (f) right time to let public authorities employ persons with fantastic salaries, some of them directly, without the issue of public call for applications etc etc. It's another case where Mina's song is appropriate PAROLE PAROLE PAROLE............!!!!!
Victor Vella
Sep 10th 2012, 10:03
It is wrong time to lower income tax rate, but ripe time for GonziPN to steal people`s monies and take 600€ a week. Hallina Gonzi u tkompliex imminghalik tghaddi in-nies biz-zmien. Issa dalwaqt tkun taf kemm tista` tghaddi u tkompli tidhak bin-nies. Jidher li fi ftit zmien iehor fadalek tirrexta.
Joseph E Briffa
Sep 10th 2012, 10:25
Victor Vella...have you quantified the loss in Revenue to the Exchequer resulting from a reduction of the top IT rate? Have you quantified the increase in Expenditure as a result of the revision of MPs salaries? It is only after you carry out such an exercise that you can compare the effect of both measures on the Exchequer, and then conclude who is actually trying to take the people for a ride.
William Caligari
Sep 10th 2012, 09:53
'Wrong time' to lower income-tax rate.
Din kienet weghda eletoralli fl-2008.
Fl'2008 il-Kabenett hadu zieda ta' 500 ewro fil-gimgha.
Kien zmien tajjeb li din ta' l-income-tax kellha tidhol fis-sehh' ukoll.
Partit ma tistax tiehdu bis-serjeta,meta jilghab bil-poplu b'dan il-mod.
Weghda weghda u ghandha titwettaq.inkellha inthom pulitici ta'
seconda classi, u l'poplu m'ghandux juri fiducja aktar fikom!
Please choose the reason of your report below: