Fabian Demicoli

This draconian eco-tax

The GRTU is putting forward several arguments against the way the
new eco-taxes are about to be implemented. The Eco-Contribution Act is an insult
to most traders. The constituted bodies representing trade and industry at MCESD
as well as the main trade unions and all NGOs representing the environment all
agree that this Act should be shelved and serious discussions held within the
framework of the proposed consultations on a social and economic pact for Malta
and as part of the consultations on the 2005 Budget.

Government has
simply messed up this issue and the sooner they admit and move forward to
present something on which we are all in agreement the better. They have an
important point and they should be content with it: we are all convinced of the
need of action on the national waste problem and we are all determined to find
the right solution.

The worst thing they can do now is to unleash the PN
snipers who miss no opportunity to attack the persons, myself in particular, who
have argued most strongly against the nonsense in this Act. It happened before
and we are ready for it.

When these political nitwits have no arguments,
who they go about hitting the persons with accusations of hidden agendas and
political innuendoes. Hopefully this time round the people who really matter
have learned that there is one sure way of achieving success in public
administration, and that is through consultation, serious consultations and not
jokes as happened with the eco-tax.

The GRTU's main arguments are not
difficult to understand. Answers can be found and we can move forward to resolve
other more important issues that are afflicting our country. First of all, this
is not the appropriate time to introduce an additional layer of taxation on
society.

The government is effectively proposing to increase his revenue
so that it can pump more money into inefficient departments and other
authorities. Big government results in institutional sclerosis, a situation
where government departments fail to function efficiently and effectively,
leading to confusion in the same institutional set-up.

Ultimately,
society bears the cost of this improper use of economic resources, including
time and manpower. This is the present situation, exemplified most clearly in
the eco-tax saga.

It is imperative that government ministers understand
the economic situation we are in. An unusually higher RPI (an indicator of
inflation), mainly due to VAT increases, coupled with a stagnated economy
(negative real GDP growth in 2003) is usually referred to as
stagflation.

It seems that inflation is of a cost-push nature, mostly
government induced, which hits the supply-side of the economy directly.
Stagflation simply means that the economy is becoming
uncompetitive.

Increasing the tax burden will suffocate the private
sector that strives for efficiency and ultimately generates value to consumers.
Further taxation acts as a disincentive to work or to employ, possibly resulting
in less tax revenue.

If unemployment increases as a result, government
revenue from income tax, Social Security contributions and VAT will inevitably
decrease. Higher unemployment triggers more unemployment benefits and possibly
underground activities. A search for new tax measures accelerates this negative
vicious cycle.

Employees are put on the alert as a result of this
eco-tax. It is a draconian move but importers are left with no other choice. If
an importer has a restricted credit limit, he will find it difficult to continue
importing the same quantities simply because eco-taxes on those imported items
will fall due in less than three months' time. It is very unlikely that
importers will sell their whole stock within this time period. Eco-taxes are
also due on stocks still unsold. Therefore, should importers limit their trading
business, and then employees will become unnecessary.

As the Trade Fair
survey has shown, people are more conscious than ever of their spending
patterns. Thus, it is not so easy for many importers to pass higher prices onto
consumers. The recent VAT increases have been internalised by many businesses to
limit price movements that render them uncompetitive.

The GRTU is
insisting that government decision-makers take on board several of its
suggestions. It is proposing, among other things, that the Act's coming into
force is postponed until all the necessary discussions and arrangements take
place. Moreover, the tax should become due at the point of sale.

It is
totally unacceptable that the eco-tax has been imposed on the opening stocks.
This creates havoc because businesses cannot cancel decisions taken before the
tax was proposed. It penalises those who ordered and shipped goods without due
notice, and those who didn't manage to sell their stocks.

The GRTU's main
arguments are economic. But we also believe that the Eco-Contribution Act is
socially unjust, especially on young couples furnishing their first home, on the
elderly with fixed and diminishing incomes, and on the workers employed by the
effected traders and producers.

The Act is also unjust as it gives a bad
name to eco-taxes and turns people against solutions to meet our environmental
challenge as they perceive all government initiatives as merely additional tax
burdens.

This Act should be scrapped and reproduced only following
agreement with all stakeholders.

Mr Farrugia is director-general of the
GRTU – Malta Chamber of Small and Medium
Enterprises.

 

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