SME Chamber

GRTU reaction to proposed Eco-Tax

GRTU is extremely concerned that
a new proposed Eco-Tax will hit directly the Small and Medium Enterprises. GRTU
emphatically states that it is not in favour of a new tax. Existing tax systems
are a heavy burden on small enterprises. In the past little, if any, thought was
given to the impact on small business when most of the fiscal measures in action
today where drafted. The sum total of all this is that small businesses in
trading, wholesaling, distributive traders and retailers cannot take on any
additional burden.


GRTU proposes that government looks elsewhere if it
is in desperate need of additional revenue to cover the growing expenditure of
environmental protection and development. Small businesses have no
administrative capacity to handle complicated systems. Regulations hit
regressively on the small business since the owner has no expertise or enough
resources to handle separate items and procedures.

Time is also limited.
As things stand, the onus of complying with VAT, PAYE, SSC, sick and parental
leave, bonus, employment contracts, recurring charges, the new Data Protection
regulation, and endless bureaucratic requirements is increasingly pressing on
the productive potential of private initiative. This goes contrary to the spirit
inherent in the European Charter for Small Businesses to which the government is
an endorsee. It is for this prime reason that GRTU argues against the imposition
of an Eco-Tax that will have to be managed by traders and that would add
additional costs to a sector which is becoming increasingly un-competitive. GRTU
definitely objects to any eco-tax requesting retailers to be the tax

GRTU believes that a restructuring and perhaps marginal
additions to existing fiscal measures may achieve the desired result without the
need of new taxation. It must be recalled that when VAT was raised from 15% to
18%, the constituted bodies were given the impression that the additonal 3% was
to cover additional health and environmental costs. Furthermore, GRTU believes
that a number of ‘eco-taxes’ already exist in Malta. The “eco-taxes” already in
place include, among others: road taxes; fuel taxes; planning charges; tobacco
excise; garbage charge to commercial units; and fees for dumping. Part of these
revenue sources should be pooled in an Eco-Fund that makes good for
environmental policies.

Such an Eco-Fund should be managed on the same
lines as agreed at MCESD: that of a Special Committee which also includes the
participation of the private sectors. If increased funds are subsequently
required then any amendments should be discussed according to the terms of
reference of the Committee. GRTU, in principle, is in favour of fiscal
arrangements that earmark funds to a specific public account that is in turn
used for environmental protection. GRTU also agrees with the Polluter Pays
Principle, but disagrees that specific items should be singled out for damaging
fiscal action. The end result usually is that consumers will have to pay higher
prices on particular items with a negative expenditure impact on other
purchases. It is not fair on the traders in these sectors. No eco advantage is
obtained while consumers suffer the burden.

Tax payers cannot accept
anymore that they have no control on the way government is spending tax
revenues. Each time government has a short-fall the tax payers are made to pay
more, with the burden falling primarily on the middle-income groups whose
consumption patterns are always targeted for increased taxation. Thus government
has to study carefully the impact of eco-taxes, particularly on competitiveness
and distributional effects. For example, international studies suggest that
taxes on petrol, which are considered as eco-taxes, have slightly regressive
impacts but might affect middle-income people most. An inefficient regulation
may lower the cost to some groups but at the cost of raising it more to

Now that at EU level all efforts are being made to cause
governments to measure the economic impact of measures prior to their
introduction, GRTU would expect government to adhere to this norm. Why set-up
Competitiveness Committees and establish competitiveness benchmarks if measures
are taken in spite of economic impact. GRTU insists on the conduct of
professional business impact assessments prior to the imposition of new fiscal
initiatives. These are needed especially if policies affect the supply side of
the economy. GRTU represents a substantial part of those who create the means by
which the economy can expand. This is why government should take heed of what
GRTU is proposing. It is the direct voice of private initiative and

In this respect, GRTU is against new eco-taxes that have to
be collected by the trader or retailer. If goods are taxed at the point of
entry, then this move is prone to face strong opposition especially if it
hinders the efficient functioning of the free market. GRTU has striven over the
years to ensure that e-customs procedures are introduced in Malta and today GRTU
is extremely vigilant to ensure that no restrictions are imposed on cargo
traffic. GRTU believes that should the tax be imposed at the Port this would
seriously affect the free movement of goods in which case GRTU would request the
EU Commisssion to intervene. Government would be in grave error and in conflict
with EU Rules if it were to impose the Eco Tax at the Port of entry. Chapter 10
of the Acquis indicates specifically which producers are subject to excise duty
and the customs department keeps a register of all importers handling the excise
products. Should government invent its own excise list it’ll throw the customs
department back to the times when customs officers will, for one reason or
another, impose on traders various forms of unacceptable demands that are now
happily defunct. Malta would also be in conflict with EU Rules on free
Competition if the Eco–Tax would be imposed on imports and not on exports as
stated in Budget Speech 2004.

If on the other hand the Eco Tax is
imposed on packaging of particular sectors of producers in Malta this would
further complicate the life and viability of an economic sector which is
currently striving to withstand the competition suffered following the removal
of levies and removal of protectionism.

GRTU has consulted with its
colleagues in Belgium where an Eco–Tax is imposed. Traders there all object due
to the great negative impact it has had on business and the excessive burden
caused to administer it. GRTU has also noted the EU Commission’s action against
the German Government following the hasty introduction of a deposit scheme on
certain products. The EU commission is arguing that the German scheme is
infringing competition rules.

GRTU is monitoring efforts by other EU
governments to introduce Eco–Taxes through its participation in the
Eco-Committee of EuroCommerce. As representative of business interests in trade,
wholesale and retail, EuroCommerce is objecting to the type of Eco-Tax which is
being proposed in Malta as unworkable, or infringing on free trade and may cause
unnecessary burden on traders. GRTU, through EuroCommerce, is advised to object
to the introduction of the proposed Malta Eco-Tax.

Finally, GRTU notes
that Eco-taxes exist in countries where fiscal structures have already been
overhauled. Our fiscal structure was overhauled in 1995 after the introduction
of VAT and in 2004 when levies were removed. However, other combinations of fees
and minor taxes complicate and distort the system. It was emphasised that VAT
would be the main tax and would replace the multitude of smaller taxes that have
huge compliance costs. GRTU has steadfastly recommended that the fiscal
authorities should design a taxation system that acts as an automatic stabiliser
and is therefore sensitive to business cycles and consumption forces.

GRTU objects strongly to a system of hotch potch taxation. GRTU argues
that the current economic climate in Malta shows that it is certainly not the
time to continue impinging on the already dampened business platform. Malta is
losing its competitive edge with the high aggregate tax revenues that feed
unproductive spending. GRTU strongly urges government not to impose additional
tax and bureaucratic burdens however much laudable the aim. Enterprise in Malta
cannot take on additional stress.

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