The Business Observer asked a few stakeholders what they expect to hear next Monday from Budget 2017 to keep the country’s current momentum going.
KPMG
Tonio Zarb, Senior Partner
We’re a week away from Budget Day. Do you have particular expectations for the 2017 budget?
Malta’s economic performance for 2015 has been robust and the economy demonstrated notable resilience in a challenging macroeconomic environment over the last several years.
Bearing in mind that the annual real GDP growth rate registered at 6.3 per cent in 2015, making Malta one of the fastest growing economies in Europe, the expectation is that the government will not adopt any measures that destabilise the status quo or go counter to continued growth. This healthy economic environment should serve as an opportunity to take stock of the situation and take cognisance of the fact that further action needs to be taken to progress towards a sustainable public sector and revenue expenditure balance. There is also the need for a clear vision of upcoming opportunities and threats, and an invitation to the private sector to coordinate initiatives with the public sector to address these. Lastly, in a concerted effort with civil society and stakeholders, adopt and implement more initiatives to address inequalities in the country.
Are there any measures that the government can take to sustain the current momentum?
In the short term, Malta’s momentum can be constrained by the saturated utilisation of scarce resources. We are already experiencing tensions in the labour market, and clearly tensions are arising in the utilisation of land and in our transportation and infrastructure.
The economy can regain momentum if tangible initiatives are adopted to relieve the pressure points. We need to consider diversification – flesh out the services sector into a broader-based collection of services and revitalise manufacturing. Also, we should look at building and capitalising more on Brand Malta. This idea may be based on stereotypes but Brand Malta is still underutilised – it should be refined and revived. It carries an immense potential as a go-to-market asset.
Is there any particular measure that the government should introduce to foster more business activity?
Malta’s pro-business approach has already proven to be effective in facilitating and fostering business activity. The business community is thriving as a direct reflection or consequence of a strong economy. Naturally, parallel measures can be adopted to further harness business growth. One such measure could bridge the connectivity gap between the government and the private sector. Direction should flow around the system, not be solely bottom-down. Mundane problems that afflict us all, like traffic, require creativity and flexibility.”
Multigas
Mark Asciak, Commercial Manager
There is no argument that the Maltese economy is going through a buoyant period. Business sentiment is good and companies and entrepreneurs show this through their willingness to invest in new projects and more value-added services.
Nevertheless, this environment requires nurturing to keep it sustainable among the unstable scenarios going on internationally.
One of the fundamental factors affecting the competitiveness of Maltese businesses is the cost of energy, which despite tariff reductions, remains comparatively high. Aligning energy rates closer to EU averages would provide a more level playing field for local business on the international scene.
Finding suitable human resources for certain posts has become difficult in recent years, particularly in technical fields. A comprehensive analysis of the skill gaps that have surfaced is needed together with an action plan to amend curricula and provide target training to improve the match between applicants and the posts available.
Finally, we strongly support adequate consultation on any measures affecting businesses and employers well before implementation. A constructive two-way discussion between the government and businesses can only lead to a smoother and more effective launching of new policies for the overall benefit of all stakeholders.
PKF Malta
George Mangion, Senior Partner
Our expectations on the budget are varied but the main topics include a better and equitable distribution of the national wealth to deserving persons whose family income may be low, hovering close to the level associated with poverty. Poverty can be both absolute and relative. Of course, absolute poverty is a social evil that needs to be fought by more equitable distribution of taxes and other revenues generated in the current years as reflected in the stellar improvement of Gross National Product. One of the barriers is the incidence of red tape and excessive bureaucracy which eat up millions of euro in the unproductive sectors and which is a hidden form of taxation. As to relative poverty, this is the sign of affluence arising between different classes of society and there is little that a budget minister can do to minimise or rectify such occurrence .
One aspect of a true social conscience is that low income groups and pensioners are not taxed again on their minimum income since inflation – albeit adjusted by the Cola mechanism – is difficult to assess accurately and, in the case of some pensioners, they have to finance the ever increasing costs of medicines which fall outside the free list. Higher investment in social housing and subsidised rents for low income category is a priority.
The government should be on the lookout for new niches such as higher banking facilities for aviation, attracting more international banks to remove the dependency on one major bank providing corresponding banking facilities, the consolidation of the maritime sector, oil and gas bunkering infrastructure and robust incentives to film industry and, finally, the attraction of international innovation centres to create a centre of excellence in the coveted field Life Sciences industries, oncology studies and nanotechnology.
It is imperative that both parties unite to resist pressure from Brussels to change our fiscal regime which has served us well for the past 30 years.
In view of BEPS and the recommendations of OECD and Group of 20 to harmonise corporate taxes and introduce a Common Consolidated Tax Code in a one-size-fits all manner, it is important that Malta defends itself against any unwarranted change in its fiscal regime. Of course, it is also important that the government appoints an ad hoc top level committee to study alternative tax incentives which – if push comes to shove– would be an acceptable alternative to the full imputation system.
Alternative Technologies
Mario Cachia, CEO
My expectations are that the government continues to incentivise work and investment while keeping family- friendly measures in place.
As an engineer, I would say that, to keep an engine running well, you have to keep it maintained well and, as the old saying goes, oiled well.
Hence, the tax credits for companies to reinvest, to retrain and to expand are all welcome as they help companies like ours give a better overall service to our clients as well as to keep abreast of the latest technology in the field.
Malta has to remain attractive for foreign investment. This, however, brings with it also burdens and needs. We need to make sure the workforce is well trained to be able to take up the jobs that are created. We are already seeing a problem here, especially on technical jobs.
The infrastructure also needs to be able to cope. The electricity supply and distribution, the road and transport network, the communication and telephony services, accommodation and supplies, will all need to be able to withstand and support this growth.
ARQ Group
David Borg, Director
The minister has made his objectives very clear when announcing the forthcoming Budget.
I expect it will seek to further consolidate the government’s ambition to continue building on economic growth, reducing the deficit and allowing for a more equitable distribution of wealth, particularly across segments that are most in need.
The government must continue to take all steps necessary to protect what has been achieved so far. It is also important that the government continues to encourage and embrace dialogue with the various stakeholders and also cut down on any excessive red tape and bureaucratic procedures wherever possible while, of course, respecting international standards on due diligence.
The country’s size and the speed with which we can react to economic and business trends in a fairly short period of time remains one of our key competitive advantages but, in order for this to remain effective, we must see better coordination and cooperation across the board.
The international business landscape has changed tremendously over these past few years and will continue to change further.
With the focus more and more on the creation of substance, we must ensure that our infrastructure and the suite of services available remain valid and up to date.
In this regard we should be looking at new areas and measures for raising corporate finance and for funding new businesses.
EuroBridge Shipping Services Ltd.
David Abela, Managing Director
I am not the kind of person that gets too excited by Budget Day since most of the policies nowadays get decided during the year and not left for the Budget.
I don’t think there will be huge surprises since this government has always maintained that stability is the main priority, so I expect them to continue implementing pro-business policies while reducing tax evasion as much as possible.
The government must make sure that current growth does not become a bubble which could burst and take us into a recession.
Economic growth must always be sustainable for as long as possible in an ideal scenario, so they must make sure that this growth is felt throughout the whole spectrum of the Maltese economy.
Traffic is becoming such a problem these days that it is the single most issue harming local businesses! It might be too late in this legislature but the government must sit down, discuss a way forward with all concerned and implement a plan – and fast!
Otherwise, reducing bureaucracy has to remain another government priority for this Budget.