What sort of conclusions will the joint committee examining a proposal to slash VAT rates on restaurant meals reach, besides the obvious one? Lowering the relevant VAT rate from 18 per cent to five per cent will result in a substantial drop in the revenue the Treasury collects from this indirect tax.

If the Treasury loses revenue it is likely it will try to make it up from some alternative source. Unless, that is, it can assume that the budgetary revenue will be buoyant enough to automatically compensate for the tax cut.

In the present recessionary circumstances government revenue is anything but that. The Treasury is facing an underlying contraction under all heads of revenue. And that in the context of European Commission foolishly breathing down its neck to bring the deficit into line with the Maastricht criteria of three per cent of GDP at market prices.

There is another fiscal consideration to consider, one linked to social justice. If the Finance Minister had enough revenue to be able to choose between cutting taxes and spending more, should he cut VAT, or should he instead boost social assistance to those who live outside the tolerable margin of our society?

There are other considerations of more direct relevance to the tourist industry. The proposed VAT cut could, for instance, also affect the number of people who book a hotel room on a bed and breakfast basis and take one or two meals in their hotel. Or those who book on half board and at times take their second meal in their hotel restaurant.

Hotels are already charged VAT at a rate of five per cent. It was like that from the very beginning of the introduction of the tax. Will slashing the rate for the restaurant trade lead to a stimulus to the economy, as claimed by backers of the move?

That is unlikely. As the veteran Keynesian economist Karm Farrugia has pointed out in a typical short but vibrant letter to this newspaper, stimulii come via the government's capital budget. A cut in personal tax rates can also act as a stimulus, to the extent that taxpayers do not save the income which the government forgoes, or do not spend it mostly on imported goods and services (like travelling abroad).

Notionally, if tourists and Maltese diners-out pay a little bit less on meals eaten in non-hotel restaurants, they might spend that amount on something else. But, how much can all that amount to? Presumably the joint study will try to come up with a calculation in that regard, perhaps using the National Accounts input-output tables, plus any relevant data available to the Malta Tourism Authority.

Throughout, this line of reasoning assumes that restaurateurs of all types and sizes would pass on the requested VAT reduction. Will they? Some would do that. There are likely to be numerous and notable exceptions. There is ample evidence to support that charge, anger though it will those in the trade and especially their leaders.

The latter have undertaken that a VAT reduction on meals will be passed on to the consumers. How can they reasonably guarantee that? When Malta joined the European Union five years ago we waved good-bye to customs duty. Among other things that included duty on imported foreign wine. Most importers duly reduced the wholesale and retail price of their foreign wines.

Was that reduction passed on to diners by restaurateurs? Some did pass it on. There were not many of them. Aside from the general three-times mark-up on wine, especially that of the lower- or medium-priced category, practically all the restaurants I frequent kept the same basic price. When I queried their price they looked at me in surprise, as if I suddenly had changed my liberal character. Others reacted by offering me a discount - but what of those who did not speak out?

Some restaurants did lower the prices on their wine list, but not for long. Take a look at the average wine list now and you might well wonder where all the talk of lowered prices after the end of customs duty had gone.

Nowadays if there is one thing that most regular or occasional diners out agree about, it is that the cost of doing so is becoming quite prohibitive. Especially so when one compares to other tourist destinations, not excluding Rome.

Those in the trade will point out to the rising cost of local fish, never in huge quantities. Maybe so - but there is no restriction on imported chilled or frozen fish and other seafood. As for meat, the cost of most cuts had shot up, and restaurant prices duly reflected that. But, was there a corresponding downwards move when import and selling prices went down?

It is educational that, dissecting the food sub-index in the Retail Price Index during the Labour Party seminar on inflation a foremost expert pinpointed the rise to local vegetable prices reacting to seasonal factors. Import prices have been stable or falling. Was that reflected in the menu of the restaurant of your choice?

Cutting VAT has to be seen in the context of the above and other implications.