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Parliamentary Secretary Edwin Vassallo says he wasn’t consulted by the government on the controversial eco-taxes. He also admits he has doubts about the PN’s alleged frame-up of John Dalli
Both of us are walking towards the old villa housing the Ministry for Competitiveness in Santa Venera, the day after he attacked parts of the controversial law to introduce eco-taxes during the debate in Parliament.
Parliamentary Secretary Edwin Vassallo is speaking to a certain ‘Vince’ on his mobile phone when he gets out of his car and goes through the entrance of the building facing the mediaeval aqueduct, signalling to me to follow him to his office, where I am to interview him.
“I’ve got it in hand, Vince,” he says. “They’ve already removed the imprisonment clause…I’ll see what we can do.”
It’s the second time this year that I’m interviewing Vassallo after government announces new measures that will affect businesses without any prior consultation whatsoever.
The first interview came in the wake of the smoking ban controversy last February, but this time round it is not only the GRTU that is ringing the alarm bells. Now unions, employers, industrialists, consumers’ associations, environmentalists and economists are all saying these are the wrong taxes and this is the wrong time to introduce them. And once again, the government consulted none of the stakeholders involved prior to taking its decision, to the point that the once PN-loyal UHM is telling government to forget the social pact if it persists with these measures.
So Vassallo is once again in the middle of a controversy. On the one hand, he forms part of a government that is introducing new taxes without consultation, and on the other he represents small enterprises and the self-employed, who are up in arms against the government.
He offers a qualified defence of the blanket taxes just announced by the Prime Minister.
“Every good thing can be done better. Ideally I resist every tax which will increase burdens on businesses, but certain measures have to be taken,” he says.
“If it were up to me I would have phased it in differently,” he concedes later on. “Everything is possible and consultation is still going on, and the debate in Parliament is also ongoing, so nothing should be excluded, otherwise consultation would serve for nothing.”
Was he consulted?
“No, I wasn’t.”
So much for Gonzi’s claim that he consulted stakeholders about eco-taxes. And yet in my last interview with Vassallo he had called on the government to consult all stakeholders, particularly the business sector, before embarking on any new laws that will affect them.
“The government is still learning and it still has to understand that consultation is necessary all the time,” he had said in the middle of the smoking ban controversy. “Had there been consultation we wouldn’t be experiencing this. It would be the right work practice for whoever is in politics to consult all stakeholders from the very start of any decision process.”
His words are even more relevant today when virtually everyone, from unions to businessmen, is slamming the government for lack of consultation about these new taxes.
The government “has conducted a ‘consultation process’ when it had already carved its decision in stone,” Federation of Industry President Anton Borg told The Malta Financial and Business Times last week.
“Consultation is always ideal,” says Vassallo, “but there’s a long way to go before we reach a final decision. When I was talking about policies for enterprise I insisted that one of the guiding principles should be consultation, synergy, lessening bureaucracy, better access to finance. Where have we arrived so far? Some would say nowhere, I would say we’ve started moving. We have the roadmap in hand, but it doesn’t mean that we never digress from the road.”
It is so blatantly clear that nobody was consulted about this law. Take the imprisonment penalty for those who will be found guilty for not complying (the one he was mentioning to ‘Vince’) – nobody in business, and not even Vassallo himself, would ever allow such a heavy-handed provision to be even drafted in such a Bill, which is supposedly about the environment.
“That’s been removed thanks to my input,” he says. In fact the interview is taking place merely a day after he objected to the provision in Parliament, leading Environment Minister George Pullicino to withdraw it from the Bill. “Had I been consulted from the start, it wouldn’t have been there.”
What other changes will he be pushing forward?
“I will continue discussing with George Pullicino, with the Prime Minister and Parliamentary Secretary Tonio Fenech, so that everyone learns as much as possible from this experience; so that one learns how things can be done better, because obviously whatever is good can be done better; so that one learns about the need for consultation. It’s not easy to reap every seed you sow, but I’m positive that we’ll reach our goals. I’ll be persistent and I believe we’ll achieve the right results.”
Vassallo says there are some other “technical points” which he insists must be changed in the Bill.
“We’ll be meeting in the coming days to discuss some of the technical amendments I proposed to the Bill, so that by the time we arrive at the third reading in Parliament we’ll have cleared them.”
Vassallo says it is essential for the government to be able to collect the taxes it is imposing; otherwise it will be just another abused tax-collection system.
“The abuses that can take place within this tax regime are similar to those that happen with VAT; the problem will be ‘inherited’ from VAT to eco-tax. You can get customers who tell shop owners to sell them goods without VAT, or shop owners who seek a price advantage by not paying VAT. There are also a lot of abuses by businessmen who are importing goods and products in the black economy.
“For our economy to grow we have to stop these abuses once and for all, because apart from preventing government revenue they are also hitting the honest businessman unfairly.
“So I’m also proposing that in our battle against tax evasion, the VAT and Customs departments are merged into one body, where information sharing can be fast and the audit trail an efficient one.
“These two departments are already under one ministry, so my proposal would be just a step further, although it would be a radical change in combating tax evasion. I’m sure that if government had to collect the full 18 per cent VAT, it wouldn’t have to introduce other measures to sustain its expenditure.”
Including eco-taxes?
“Whatever, although this eco-tax is, in principle, a right measure. In itself it will help change a mentality. Let’s say that eventually the government introduces this tax at a zero rate…the fact that there is this law stating consumption produces waste, and its disposal involves a cost…that is right in principle.”
Agreed, but this law doesn’t even distinguish between eco-friendly products and goods that are a downright environmental hazard.
“So far it doesn’t, but the important thing is that the mechanism is there and tomorrow it can start making this distinction.”
There has also been a lot of criticism from importers who will have to pay the new eco-tax on items that are currently in stock. Tonio Fenech told angry importers last Tuesday they were expected to make an opening stock declaration by 1 August on which the eco-contribution would have to be paid on the next VAT return due. Has this issue been resolved?
“I don’t know. I know GRTU is opposing this and obviously this has to be further discussed. I don’t know what the outcome on this issue is going to be.”
Is this an acceptable measure for Vassallo?
“Look, what’s unacceptable for me might be acceptable for people out there. What’s acceptable for me is the benchmark of people in business. Definitely what’s acceptable for me has nothing to do with what’s acceptable for (Environment Minister) George Pullicino, my priorities are different from his, and this is good, because our diverging priorities will help us contribute to this nation.
“On the one hand we have to manage our waste and take care of the environment, on the other we have to foster economic growth. Our responsibility is to manage these two national needs.”
Vassallo is no economic theorist. His outlook is shaped by his own experience as a shop owner in Mosta, and yet he downplays the critics’ view that this is not the right time to introduce new taxes. He says every tax is a burden for businesses and consumers, but somehow this is “the least bad time to introduce them.” He is more concerned with the potential abuse of the new system and with the prospect that there might be some initial shocks for retailers.
“You’re going to get some who will raise prices, because they can afford to, without handing over anything to the government, as is happening with VAT with some retailers; and you will have some who can’t raise prices and will have to find ways to absorb the new expense, because competition is fierce. Still, consumption is very strong, and so is spending power, so the market will adjust itself.”
The market will also have to get used to Gonzi, given that he’s keen on remaining finance minister for at least the next two years.
“I think that’s a good decision,” Vassallo says about Gonzi’s declared wish to keep finance, this despite his lacking background in the world of finance and economics.
“Look, despite his lacking a background in finances, the important thing is that whoever is managing finances is a practical person, that he knows what’s the target and is determined to reach it.
“You definitely can’t have someone who just wants to look nice as finance minister and the fact that Gonzi is sacrificing his popularity, so to speak, to get our finances in order, means to me that he’s determined to achieve his goals.”
Vassallo was one who had publicly supported John Dalli in the PN leadership race. Does he believe the Cabinet is a weaker one without Dalli?
“The Cabinet is made of very valid political personalities. Every member of the Cabinet has his or her contribution to make, all of them have different contributions to make, and John Dalli gave his own contribution. The absence of any one of the Cabinet members is a loss for the team, so yes there is a lack of a certain experience and contribution.”
He puts on an existentialist tone: “But life goes on; life gives, life takes, there are those who enter and those who exit, nobody is there forever, irrespective how valid his or her contribution is.”
How seriously did the Nationalist Party take Dalli’s declaration that he did not exclude a frame-up by the Party?
Vassallo pauses for a few seconds.
“How serious? … I hope the party took those allegations into consideration and checked thoroughly whether they were true or not. If they were true, it’s bad. If they’re untrue then one has to forget them.
“But obviously everyone has to examine his own conscience and if there was any wrong-doing it mustn’t happen again. If there wasn’t any wrong-doing then it will remain an unproven allegation. But I am in no position to know whether it is true or false.”
Doesn’t it worry him to have such a serious doubt hanging over his own Party?
“Life is full of doubts.”
Oh no, he’s being existentialist again.
“The Party is made of people of the world and we have to manage these perceptions. They can be real and they can be invented: it’s very easy to frame someone up and it’s also very easy to invent allegations. Everything is possible. Life itself is a frame-up.”
Was he let down by Dalli?
“No, not at all.”
Did he have to resign?
“That was up to him. Maybe if I was in his shoes I would have done the same, but I don’t know all there is to know about his case.”
The information is public.
“No, not everything is public, believe me. You can never know the whole story. That’s why I don’t criticise him. We remain close, as much as I’m close to the Prime Minister, and I’ll continue to speak my mind whenever I believe it’s in the public interest to do so.”
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