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David Lindsay
In a wide-ranging interview with our sister paper, The Malta Financial and Business Times, Finance Ministry Parliamentary Secretary Tonio Fenech is adamant that while government has no immediate plans to increase taxes, the measure cannot be completely ruled out as government grapples with its fiscal deficit.
“Primarily we want to see more tax enforcement and therefore we will hopefully not have to resort to other tax measures,” he explains in an interview to be published Wednesday.
He insists that the Tax Compliance Unit is yielding tangible results but adds, “Obviously no government can give a commitment that it will never increase taxes, this depends on how we have decided we are to address our fiscal and structural deficits. At this stage we have no immediate plans to increase taxes, but I cannot ‘sign a contract’ that we will never increase taxes.”
Tonio Fenech also issued a strong call for sectorial interests to be laid aside in the wider interest of the country.
“We can’t keep looking at the issues facing the country from a sectorial standpoint. We have to realise that we are a small country and if we work together, we can make life much better for everyone.
“However, if we keep looking at the issues facing the country in a sectorial way we will, most probably, not meet our targets, nor will we see our economy picking up. Either we go for it together, or else government will have to take the decisions in the interests of the country.
“But how much better would it be if everyone had to understand the decisions that have to be taken, if we were to take these decisions and move forward with them together?”
On the issue of government’s cost cutting drive, Fenech calls for a degree of realism from government entities.
“Let’s be realistic in these cost cuttings, we need to have structures in place to ensure that all government entities are actually moving within their targets, not only in terms of their objectives, but also in terms of their finances.”
He exemplifies, “We cannot accept that we have an entity that simply goes out to make a loan without government approval, or gives salary increases beyond what can be afforded.
“We are setting up a unit to ensure we have an eye on what’s happening. Government entities are relatively autonomous in terms of their operations and strategies, but they are not autonomous in their financial positions.
“These are still public funds for which they are accountable, and which are now being measured in terms of general public debt (through new public accounting procedures introduced with EU membership) so there is to be a different approach in this sense.”
Government expenditure issues across the board are being reviewed to determine further structural changes to be implemented. But, he warns, reducing government expenditure can, in the short term, impact the economy negatively if not carried out wisely, due to the multiplier effect such spending creates.
“Expenditure must be capped to reduce the deficit but the market must be unleashed to make up the shortfall the government has created through this reduction. Expenditures must be cut from areas not affecting the country’s economic growth, and must be shifted into more productive areas that lead to more economic growth.”
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