The draft of next year’s Budget sent to the European Commission features a further shift from direct to indirect taxation, although it does not involve raising VAT. It proposes to increase revenue from indirect taxation such as levies on consumer goods and services and an upward ‘revision’ of fees. The government hopes to increase its revenue from other sources as well, while it continues to reduce income tax.
This is not the reason why the Commission is asking for clarifications on Malta’s Budget proposals but it is quite a good reason for authentic Maltese left-wingers to abandon Joseph Muscat’s New Labour. The problem for them is what to do to be relevant in our society today.
Surprisingly the negative low-key rumblings against indirect taxation came from the Chamber of Commerce, which interpreted – probably correctly – the official statement about next year’s Budget as an indication that there will be increases in excise duties and that this situation is the result of government’s poor track record in tax enforcement.
In other words, the government has failed miserably to control VAT abuse and is instead resorting to collecting easy money from excise duties to the detriment of tax-abiding entrepreneurs. This is no statement against indirect taxation in principle but a plea for it to be applied in a fair and effective way.
The GRTU also expressed doubts about the Budget details, complaining that it lacks details and that, moreover, the proposed steps do not seem to address the problem that some aspects of the current indirect taxation system are actually abetting unfair competition.
Yet these reactions only reflect the concern of these two employer organisations about the need for the government to ensure a level playing field in commerce.
The reaction of the GWU to the Budget proposals was non-existent. The silence is deafening.
In the past, Labour had turned the issue of direct versus indirect taxation as a handy tool used to emphasise the then ideological divide between it and the Nationalist Party. Indirect taxation, the argument went, hits every citizen equally irrespective of income and therefore favoured the higher income groups while castigating the lower income groups. On the other hand, direct taxation was income-based and was more socially just, leading one to conclude that Labour was the defender of the ‘worker’ while the PN was bent on making concessions to those who should be paying more taxes.
One hardly finds this argument on the opinion pages of l-Orizzont these days. It has meekly accepted Muscat’s revolution and, together with its owner, the GWU, completely forgot what it was supposed to stand for.
After last year’s Budget – when this current Labour administration confirmed this shattering ideological switch – there was only one small letter of complaint in l-Orizzont and it was written by Communist Party secretary Victor Degiovanni. He complained that increasing indirect taxes was anti-social and is diametrically opposed to the principles of natural justice.
According to Degiovanni, this – coupled with the government’s refusal to raise the minimum wage and its refusal to tax property – shows that the government had lost its social conscience. Degiovanni knows where his enthusiasm for social justice comes from as much as Muscat knows where the votes that gave him an electoral majority come from.
Interestingly enough, Degiovanni’s line is practically the same hymn sung by Labour before Muscat became its leader… and when VAT was anathema – until they found they could not really replace it.
Is this, then, the end of Labour as we knew it?
This enthusiasm for indirect taxation hardly conceals the fact that this administration is unnecessarily bloating public sector employment in the true ‘Old Labour’ tradition
Almost, but not quite. This enthusiasm for indirect taxation hardly conceals the fact that at the same time, this administration is unnecessarily bloating public sector employment in the true ‘Old Labour’ tradition. And this will soon be costing the country dearly.
In the past year or so, about 80 people have been added to the payroll of the Water Services Corporation, an entity that was always overmanned and started to produce results only when it began to farm out provision of services to private contractors.
Last Sunday, the PN’s il-mument reported that Air Malta engaged some 300 new employees in the past 12 months. This happened at a time when the company is facing dire financial problems with its pre-planned restructuring programme not achieving its goals. This seems to be utter madness.
And it goes on and on.
Moving away from direct taxation is a big step for Labour. Accepting that the state should employ all those who want a job ‘looking after some gate somewhere’ – as one labour supporter put it – undermines all economic progress.
Hiding behind the fact that public sector employment has not increased as a percentage of total employment when it has increased in absolute terms is no good. More so when half the new jobs created in the private sector were taken up by foreigners while so many Maltese prefer to wait for the promised land where one can ‘look after some gate somewhere’, at the expense of the taxpayer.
In this case, of course, it is irrelevant whether the source is direct or indirect taxation.
micfal@maltanet.net