Finance Minister wants 'in-depth studies' on impact of taxes well ahead of budget presentation

Edward Scicluna says increasing national insurance will not lead to significant strengthening of pensions

Finance Minister Edward
Finance Minister Edward

Finance Minister Edward Scicluna wants studies to be drafted well ahead of the presentation of the budget, studying the impact of increase in taxes on different industries.

Addressing the third edition of the government that listens campaign, Scicluna said the government should not start worrying or face complaints on the negative impact of certain budgetary measures on the eve of a budget or after their implementing but during the year leading up to the budget.

"We face huge resistance in the administration to keep things as they are...the same things which drove the previous government straight into a wall. There are systems which are not working, one of the reasons prompting us to merge the VAT and income tax departments," he said.

The minister said that, soon after this appointment as minister for finance, he travelled to Washington seeking the help of the International Monetary Fund to help government in strengthening fiscal discipline.

Scicluna said government should not prepare for an increase in taxes on the eve of a budget but a year before.

Speaking on pensions, the minister said simply increasing the national insurance contribution was not enough. "It will not lead us anywhere especially for individuals who are on minimum wage," he said. "That is why we need to increase workers."

In his introductory speech, the finance minister said the budget presented for next year rewarded hard work, encouraging employment.

"This is a budget so full of different measures, that even I am still counting...yesterday for, example, I found out we have 12 measures just for women. This budget is not simply an accounting exercise but one which encourages people to join the workforce. I am representing the taxpayer so I have to ensure that there is a return on the taxes paid," Scicluna said.

€180 million in social benefits will be forked out this year to assist 140,000 persons entitled to some sort of benefit. Scicluna said the government could not allow dependency on social benefits when a person could be encouraged and trained to join the workforce.

The minister said that upon election in 2013, the Labour government was faced by a situation where Malta was placed under excessive deficit procedure and another for macroeconomic balance.

"Put simply, they admitted us to hospital and took us straight to the cardiac care unit," Scicluna told the small audience gathered at St George's Square. "We not only had heart problems, but were also suffering from jaundice."

As for the EDP, "Malta is still in outpatients", monitored by the EU even though the deficit target for 2014 will stand at 2.7% with government projecting a 2.1% deficit for 2015.

The European Commission has issued an opinion saying Malta’s draft budget in 2014 – submitted earlier this year – will not fulfill the requirements to correct the government’s deficit under the excessive deficit procedure (EDP). It transpires that the lack of detail on Budget 2015 revenue measures in the draft budget that the finance ministry gave to the Commission, meant that the EC had to base its opinion on a “no policy change” based on previous budgets.

The ministry pointed out that the €28 million euro worth of fiscal consolidation measures announced in Budget 2015 were not formally taken into consideration by the European Commission in this evaluation.

Scicluna argued that Budget 2015 further helped women "to break through the glass ceiling"and encouraging them to join the workforce.

"It is not true that women refused to join the workforce in the past because of some religious belief or because families in Malta are different from the rest of the world. Truth is that there were several obstacles for women to join the workforce. An important measure which we will be endlessly proud of is that of providing free childcare centres," he said.

On precarious work, Scicluna said it was a huge injustice that two workers doing the same job received different wages, simply because one was employed directly with the government and the other was subcontracted. The government has now pledged a regularisation of salaries of individuals employed by contractors. In 2015, subcontracted individuals working on government projects will be entitled to a salary not less than a salary paid to to a government employee with the same job.

"A government that listens is not just a slogan for us. This is not a marketing exercise but a government that truly listens to what people and unions need. The government's job is then to implement these ideas. The reason that the budget was welcomed by the majority of social partners is because we listened to them in the first place," Scicluna said.

The European Commission recently asked Malta to top up its contribution to the EU budget by €13 million, a request which Scicluna insisted the ministry had already factored in its budget.

"The more a country improves economically, the more the contribution has to increase. This is a fact of life. But here we're talking about some €10 or €20 million...not about 66% of a billion euros in EU funds which the previous administration did not make use of and we, in 20 months, had to rush to use in order not to lose them. In seven years, they only made use of 33% of the funds available for Malta to spend on projects," he said.

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