The Malta Chamber expressed serious concern over statements being made by the Finance Ministry that it was government policy “to shift away from direct taxation on labour towards indirect taxation”.

At the same time, the government said this did not mean any increase in the VAT rate.

In a statement this afternoon, the chamber said it interpreted this as a potential increase in excise duties and other indirect taxes on top of the increases introduced in the last budget.

It said its concerns were justified given Malta’s poor track record in enforcing payment of indirect taxes through fair and effective market surveillance. The compounding effect of excise taxes, eco-contribution and VAT added to the concern of tax abiding operators.

The chamber said it was opposed to further increases in consumption taxes until such time that the government put in place effective structures to ensure a level playing-field for all.

The structures needed to respect EU rules and had to include uniform procedures for the clearance of all cargo at the port and an effective system of market surveillance.

The prospect of raising the tax differential between Malta and neighbour EU states was not acceptable to the chamber because it rendered contraband all the more attractive to the detriment of government coffers and tax compliant businesses.

"The proposed increase in an attempt to meet budget deficit targets provides clear testimony of a practice often lamented about by the Malta Chamber whereby honest businesses are ultimately made to pay additional tax because government is not able to enforce payment of tax by those who evade."

It strongly urged the Finance Minister to carefully assess the situation before announcing any measure which could give rise to further injustice which could also potentially be counter-productive to both government and business.