When Malta negotiated membership of the EU more than a decade ago, it managed to obtain a very significant concession from Brussels allowing it not to charge VAT on foodstuffs and medicinal products. By so doing, it joined the UK and Ireland in not having to levy any value added tax on certain essential items.

So it came as no surprise that countries enjoying the benefits of this concession were alarmed when the European commissioner responsible for taxation, Pierre Moscovici, told a news briefing that “the Commission would consider whether to scrap British ‘zero rate’ on some items”, a legacy pre-dating the current EU minimum VAT of five per cent, “as it would have to reassess everything”. He noted that while no decision had been made, a “zero rate is not the best idea”.

This must have been a step too far because Mr Moscovici soon had to retract when faced with negative media reactions in the UK. He had to reassure those who did not welcome this plan that it “is far too early to talk about what proposals may emerge from the VAT review and, in any case, any decision in this area requires unanimity by member states”.

Mr Moscovici did not do much to reassure UK Eurosceptics on the merits of voting for Britain to remain part of the EU in the forthcoming referendum by challenging the country’s right to decide on fiscal measures that were agreed with the rest of the EU in the 1990s. He has undoubtedly also ruffled the feathers of politicians and most other people in Malta by implying that zero rate VAT, even on essential items, could possibly not be tolerated in future.

While some may argue that the Maltese economy is performing well and therefore could absorb the shock of an inflationary five per cent increase on foodstuffs and medicines, such a change would have serious negative social and economic effects. While Malta can no longer be considered a low-cost country, it still partly relies on attracting investment because the median wage paid locally is significantly lower than that of competing countries in the EU.

An increase in labour costs that would result if the cost of buying essential products like food and medicine is eventually passed on to employers would damage Malta’s ability to attract investment and create jobs. The island’s competitiveness should be reinforced and not weakened by raising the cost of employment.

On the social level, it is evident that if the EU were to partially achieve its aim of tax harmonisation by eliminating Malta’s VAT concessions the people who would suffer most would be the low wage earners who have to absorb the shock of an increase in the cost of living. Lower-wage earners spend relatively more of their disposable income on food than those whose revenue is higher and, therefore, they would need to be protected from fiscal pressures emanating from Brussels.

Tax harmonisation is certainly not going to disappear from the EU agenda in the coming years. But decisions on fiscal issues that would affect ordinary people as well a member state’s competitiveness should remain in the hands of every country’s government.

The implications of Mr Moscovici’s original statement on Malta’s VAT concessions need to be thoroughly studied. It would help if political consensus is reached to send a clear message to Brussels that Malta would not accept any erosion of the VAT concessions it was granted when it joined the EU.