Fabian Demicoli

Electricity Tariffs and Fuel charges

Electricity Tariffs and Fuel charges

GRTU regrets that the solution being implemented by government discriminates grossly against a wide range of small enterprises. GRTU has steadily argued that the solution to the problem caused by the steady increase in the price of imported fuels and gas should be spread fairly and should not distort heavily the cost structures of enterprises at a time when the economy is showing signs of new growth. GRTU has also advised government to give to Maltese enterprise the advantages of EU Directive 2004/74 that offers the possibility of temporary exemptions or reductions in the level of taxation on energy products especially fuels used in enterprise on stationery equipment. Unfortunately in its implementation of this Directive government has preferred to discriminate grossly against a wide cross section of small enterprises by identifying only manufacturing enterprise and the hotel accommodation sector as beneficiaries of reduced taxation in fuel. GRTU strongly supports all initiatives to help industry but GRTU strongly objects to this discrimination among enterprises.

Electricity Tariffs and Fuel charges

GRTU regrets that the solution being implemented by government discriminates grossly against a wide range of small enterprises. GRTU has steadily argued that the solution to the problem caused by the steady increase in the price of imported fuels and gas should be spread fairly and should not distort heavily the cost structures of enterprises at a time when the economy is showing signs of new growth. GRTU has also advised government to give to Maltese enterprise the advantages of EU Directive 2004/74 that offers the possibility of temporary exemptions or reductions in the level of taxation on energy products especially fuels used in enterprise on stationery equipment. Unfortunately in its implementation of this Directive government has preferred to discriminate grossly against a wide cross section of small enterprises by identifying only manufacturing enterprise and the hotel accommodation sector as beneficiaries of reduced taxation in fuel. GRTU strongly supports all initiatives to help industry but GRTU strongly objects to this discrimination among enterprises.

The majority of Maltese workers do not work in factories or in hotels and many thousands work in enterprises who are suffering greatly as a result of the sharp increase in electricity and water tariffs. These firms are now also suffering from government’s exclusions of these enterprises from the lower taxation on alternative fuel. The possibility of shifting from electricity to low cost fuel is thus being denied to them while those that are heavy consumers of diesel are caused to suffer proportionately more than others. Firms in the catering, retailing, pharmaceuticals, garage repairs, restaurants, warehousing, services and others are paying heavily on electricity and fuels and these firms will face increasing pressures as the tariffs continue to rise. GRTU therefore requests that you review this unfair decision and make lower taxed fuels available to all firms with stationary equipment irrespective of whether they are in manufacturing or not. The same applies to the capping of total outlays on electricity. Why GRTU asks is government discriminating between places of work? Jobs should be defended irrespective of the enterprise sector.
GRTU also raises the issue of firms who are heavy users of fuel oils. Why cap only the users of electricity and capping is not extended to fuel oil users. Taxation on fuel should furthermore be reduced or be removed completely. Why charge import duty and levy excise duty on oils essential for industry? The cost carried by firms using fuel oils is too high and it is grossly distorting their competitiveness. Furthermore under EU Directive 2003/98 these firms are entitled to purchase fuel oil at the same prices that Enemalta charges to the Power Station.

GRTU is also requesting that your government reviews the tariffs imposed on water bills. It is not fair that enterprises and households are being made to pay the full surcharge of 55% on water consumption when Water Services Corporation costs show that only 40% of its operational costs are electricity costs. The tariff on water bills should therefore be 22%.

GRTU also proposes that your government does not impose the family compensation on employers. Compensation should come through tax relief by the raising of the taxation threshold. Taxpayers should be awarded tax relief equivalent to the electricity tariff increases thus allowing workers to retain more of their earned income to compensate for the increase in electricity tariffs.

Similarly enterprise should be given tax relief through additional tax credits that will mitigate for the economic impact of the increased tariffs. The increased tax credits should be based on 2005 electricity consumption levels and go up further for any reduction in consumption caused by the use of more economic alternatives and economy saving schemes. This scheme will hardly effect government’s budget consideration as the increased costs will substantially reduce if not eliminate, taxable profits anyway, while the increased tax credits will sustain firms to stay in business.

GRTU is also strongly recommending that the Energy Procurement Advisory Committee should include persons nominated by MCESD. These persons will act on behalf of the private sector users. It is incomprehensible that the rights of consumers, especially SME’s, for transparency and access to the pricing of energy products is not being defended when this is a right dictated by the EU Directive No 2003/54, which provides for transparency on the mechanism used to establish electricity tariffs.

Finally GRTU urges you to ensure that Enemalta abandons the fallacious strategy adopted over the last twelve months not to hedge or take other purchasing options that protect the energy user from the imposition of additional tariffs each time the international prices increase. The current practice of transferring on to users all increases is unacceptable. And why, asks GRTU, are surcharges based on international prices and not on import price parities? The scarcecity of fuel oils on the international market shows that decisions need to be taken in this regard without further delay. Enterprises cannot support additional tariff increases over the next months.

Our strong appeal is that you do your utmost to ensure that small and medium enterprises are safeguarded and that households disposable income is not drastically affected by the new tariffs at the expense of other consumption. We strongly believe that government needs to do more to safeguard the interests of all otherwise most of what is being gained, through a very costly process of restructuring and reallocation of resources, will be lost and the economy will revert to a very dangerous downward spiral.

We trust that you give your maximum attention to our demands.

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