Time to study option of free public transport during peak hours - Scicluna

Finance Minister says government slowly shifting tax burden from work to consumption 

Edward Scicluna
Edward Scicluna

As the country continues to face increasingly high congestion costs, Finance Minister Edward Scicluna said it was time to study the option of providing free public transport services during peak hours.

"Malta has subsidised public transport services generously to keep fares as affordable and low as possible to encourage people to make use of buses," he said. "We should study the option of free transport during peak hours."

The minister was delivering an opening speech during the Malta Institute of Management's annual VAT and EU conference.

Scicluna spoke of the government's policy to slowly shift the tax burden from work onto consumption - a system that was being pushed by the European Commission following positive results registered by member states who favored the shift.

"This shift [in Malta] has had positive results. To make work pay, we have removed the tax burden and pushed it onto consumption without increasing the overall tax burden," he said, adding that taxation on consumption was based on goods and service with higher externalities costs.

VAT, he said, was a neutral tax. But with products such as tobacco - where the cost on healthcare was too high - the consumption tax should be higher.

"Goods with high externalities result in higher costs on the taxpayers," Scicluna said, adding that a 30c increase on tobacco was an attempt to return the enormous expenditure on health.

On fuel, the minster said that "one has to charge accordingly" due to high externalities of pollution and congestion.

Chewing gum, he added, was another product with "a high cost". "Just watch the new stairs adjacent to parliament and you can see the mess. It is very costly to clean it and so we are taxing it to recover its external costs."

Same was with the tax on plastic bottles: while Eco tax was "hated", an excise tax was a fairer mechanism to safeguard the environment. The measure comes in on 1 January 2016 - meanwhile, the government will be fine-tuning the law to incentivise those companies who are environmentally aware and spend money to collect their products back.

Scicluna added that the overall positive effect of the 2016 budgetary measures - with tax cuts for low income earners and increase in pensions - will be "bigger than anticipated".