For just €3.3 million, cement levy is no green tax but a quick revenue generator

Based on the 333,257 tonnes of cement imported in 2009 an excise duty of €9 per ton of cement could rake at least €3.3 million for the government. The amount collected from this tax might well be higher in view of works on pending mega projects like Smart City which could increase imports of cement.

Cement imported in Malta

The amount is considered marginal compared to the construction industry’s turnover but environmentalists and contractors concur that revenue generation rather than green thinking is the government’s primary motivation.

Developer Angelo Xuereb warns that the measure will simply result in an increase in the price of property as developers will simply pass the increase to the end user. 

According to Xuereb it is not only large scale developments like tower blocks which use cement on a massive scale and that pre-cast cement is used in the roofs of most dwellings.

He also expressed his perplexity on the impact of the hike in the price of cement on tenders already awarded by the government. “Companies awarded government tenders have won bids on the basis of current prices. The hike in excise duties will increase costs which were not reflected in costings made when tenders were submitted.”

According to Xuereb the measure cannot be justified as one penalising polluters as it does not encourage sustainable building practices.

He also points out that contractors are already penalised by increased tariffs on the dumping of construction waste. “At this rate the increase in costs will simply result in less planning applications, leading to a loss of revenue for MEPA whose costs are fixed due to the large number of people it employs.”

Xuereb expressed his concern that the government’s policies could have an impact on the construction industry as a whole. “Construction is one of the engines driving the economy…its multiplier effect associated with the various trades and ancillary services cannot be underestimated.”

On his part, Malta Developers Association president Michael Falzon acknowledged that compared to the industry’s turnover the increase will be marginal, but it would increase costs for an “industry which in the doldrums”

Green Party spokesperson for sustainable development Carmel Cacopardo also concurs that the primary aim of the levy on cement is revenue generation. "Since the increase is marginal rather than prohibitive, the demand for cement will not change substantially  and the government will simply get more revenue. As in other cases (like the marginal increase in the price of cigarettes) the government is banking on the inelasticity of demand for cement. Since the demand for cement will not change this measure serves to increase revenue generation.”

Cacopardo disagrees that with Minister Fenech’s depiction of the tax as being inspired by the polluter pays principle. “The primary aim of environmental taxation is that of changing behaviour not that of raking more revenue for the government.”

Cacopardo reiterated AD’s position in favour of a tax on vacant properties which should apply from the third property onwards. “This is a real environmental tax as it is aimed at encouraging owners to rent properties rather than keeping them vacant”, Cacopardo said.