Part of the predictable disagreement in the debate on the Budget for 2014 concerned taxation. In presenting the Budget the Minister for Finance said as an aside that it contained no new taxes. On their part Opposition spokespersons emphasised that the government was going to increase taxation by €170 million. Both sides were playing with words.

To place my comment in context, let me refer to a recent National Office of Statistics (NSO) news release on tax revenue during 2012, the last full year of the Nationalist government.

The release said that tax revenue in that year went up by €109.8 million over the previous year, and stood at €2,304.2 million.

Tax revenue, the NSO reminded its readers, can be broadly classified under three main categories – direct taxes, indirect taxes and social security contributions.

Direct taxes are defined as current taxes on income and wealth, plus capital taxes and other current taxes.

In the year under review these taxes rose by the largest amount – €86.8 million – to reach €951.0 million.

That represented 41.3 per cent of total tax revenues.

The rise in direct taxes, the NSO explained, was mainly the result of additional revenues from corporate and personal income tax, which came to €42.8 million and €41.6 million respectively.

Indirect taxes are taxes linked to production and imports, mainly Value Added Tax, excise duties and customs duty. During 2012 these went up by €8.9 million to €938.8 million, making up 40.7 per cent of the total increase in tax revenue.

Higher returns from VAT of €16.2 million, said the NSO, were partially offset by lower proceeds from other taxes on production (- €3.8 million) and from taxes on products, including excise duty (- €2.9 million).

Social contributions, it said, are compulsory actual contributions paid by employees, employers, as well as self-employed and non-employed persons.

This category represented 18 per cent of total tax revenue in 2012, boosted by a €14 million rise over the preceding year.

During 2012, the overall tax burden was 33.7 per cent, compared to 33.1 per cent in 2011. This burden denotes the total amount of taxes and social contributions expressed as a percentage of the gross domestic product at current market prices.

I suspect that the Opposition aggregated the expected increases in revenue from total taxation ... That is not political cricket

So why were the government and the Opposition playing with words? Well, as the Minister said, there were no new taxes in addition to the three indicated above. But the rate of one of them – excise duties – increased on various products, such that the Minister expects an increase of €21 million in revenue from that rise alone.

As for the Opposition it did not explain how it got the aggregate of a claimed €170 million rise in taxation. It gave the impression that it was talking about new taxes and taxation.

But that was not so. As stated, no new taxes were introduced. But taxation is projected to yield €21 million more because of the increase in excise duties.

I suspect that the Opposition aggregated the expected increases in revenue from total taxation, which is the exercise which the NSO conducted for 2012, as it does for each year once the final figures have been verified.

That is not political cricket. Revenue from existing taxation will rise next year, as always, because of the higher take from income tax because of the increase in the COLA, the cost-of-living adjustment, plus higher revenue take from social security contributions for the same reason, and from the expected growth in the economy.

Taxes as such only increase when the rates of existing taxes are raised, or when new taxes are introduced.

This playing about with words is unnecessary and worse than childish. Taxes and taxation are a fact of life, and have to be taken seriously as one of the main mechanisms of sound government. Even countries that have revenues from oil and other natural resources, bar a few, impose taxes.

Whoever is in government in Malta will have to raise revenue from tax sources to cover recurrent and capital expenditure.

In the process the indicator to watch is the overall tax burden. During 2012, this rose to 33.7 per cent from 33.1 per cent in the previous year. It will rise again this year.

We still have a tax burden which is below that of the more mature part of the European Union. And probably the burden will have to increase somewhat in the coming years, as it would have done had the Nationalists been elected instead of Labour.

But, watch that percentage and remember that unbridled increases in expenditure will always push it up.

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