Units that surpass eco-reduction entitlement should not be subsidised, Chamber says

In its 2023 pre-budget document, the Malta Chamber lays down proposals on energy, inflation and third-country nationals

Electricity units that are over and above the eco-reduction entitlement should not be subsidised, the Malta Chamber of Commerce, Enterprise and Industry said.

This was one of the proposals put forward by the Malta Chamber in its 2023 pre-budget document, published on Saturday.

It said that consumers should be incentivised to replace appliances with energy-efficient alternatives through reduced VAT on such purchases.

According to the Chamber, a substantial investment in offshore wind and solar energy would enable the country to ease off energy subsidies.

It also called for a significant investment in the distribution network to meet the energy needs, in light of the shift to electric vehicles.

“A modern grid is one which will be more energy efficient and cheaper to maintain in the long run. It is also one which will prevent blackouts and other commercially damaging shortcomings which negatively impact operations and competitiveness,” the Chamber said.

It also suggested that the energy market distribution is liberalised to allow competitive market forces to bring down prices and increase efficiency.

The Chamber said that petrol and diesel subsidies should be gradually phased out and replaced with incentives for alternate modes of transport. It said that funds allocated for free public transport should be replaced with an e-mobility wallet concept, with funds made available to make use on various sustainable transport modes.

It highlighted that investment in commercial electric vehicles had to be facilitated further, calling the capping of business beneficiaries at €200,000, an insignificant amount.

The Chamber said that vehicle road licence fees should be revised so that people pay according to how much they use their vehicle.

It also said that parking fees should be introduced in congested areas, through parking metres in order to encourage a modal shift in commuter transport.

“The zero cost of parking on the street in urban centres is a factor which disincentivises investment in parking facilities and mitigates in favour of people using their private cars to travel to congested areas,” the Chamber said.

Third Country Nationals

The Chamber said that many businesses and industries could not survive without third country nationals (TCN) to supplement the local and European market.

It called for the widening of the Key Employment Initiative scheme, to attract individuals in possession of certain critical skills and qualifications that are running short in the labour market.

It said that government should address the issue of visa delays, to ensure that appointments are granted within a reasonable period.

“A three-month interim work permit should be granted to third-country nationals, during which the employer would be obliged to ensure that the employee goes through the health screening process and submit a rental agreement.”

The Chamber said that TCNs should have access to the free labour market, once approved to work in Malta and that their work permit should be valid for three years, following a successful first year.

It also suggested that through a legal mechanism TCNs should be allowed to become Maltese citizens after years of working in Malta.

“Platform economy operators whose workforce is exploited should be reprimanded and withheld from benefiting of any fiscal support packages. Slavery practices, which are frequently undertaken jointly with unlicensed recruitment intermediaries, should be outrightly abolished,” the Chamber said.

Inflation and COLA

The Chamber said that the government’s response to the pandemic safeguarded jobs but might have been “prolonged excessively”, contributing to some of the current inflationary pressures.

It said that Malta’s inflation rate would be much higher if the energy prices were not heavily subsidised.

The chamber proposed that employees that receive a pay rise in 2022, should not receive the full cost-of-living-adjustment (COLA) increment, but only the difference between the COLA increment and their pay rise, as they “have their purchasing power at least partially safeguarded”.

For those who were recruited during the year, the COLA entitlement should be capped at the equivalent portion of the year for which they have been in employment, the chamber said.

It said that the purpose of COLA is to maintain the purchasing power of those on lower wages.

“If COLA leads to a systematic increase in the cost of production of goods and provision of services, the economy will get into a vicious spiral of wage-cost inflation that will be difficult to pull out of. “

The Chamber also proposed a VAT reduction from 18% to 7% for restaurant and take away bills to alleviate the inflation on food prices. It said that this was vital to maintain the competitiveness of the tourism industry and render eating out more affordable for lower-income groups.