Is there life after the global economic crisis? VINCE FARRUGIA, director general of the Small Businesses Chamber, looks at how Budget 2010 will prepare Malta for future challenges
GRTU has this year presented a well thought and balanced set of proposals, derived from the active consultation conducted amongst our wide spectrum of members. Through its proposals GRTU has sought to highlight the enormous difficulties small enterprises are facing everyday through the effects of the economic recession. GRTU wanted to ensure that Budget 2010 will not only support enterprise to meet the current problems but to help them launch themselves more competitively to succeed and grow in the post recession period.
We are pleased Government gave utmost consideration to most of the proposals and strategies recommended by GRTU in GRTU’s pre-Budget proposals package.
Budget 2010 is different from preceding ones because it has taken up the good proposals made during the consultation period, taking a threefold approach, which included facing up to the current problems, pushing the Government to launch schemes so as to prepare for the harsh competition that would come about in the recession aftermath, and preparation of the labour force and entrepreneurs through employment support schemes.
There had also never been a budget which invested in creativity and innovation, in alternative energy, and promotion of new technologies among others, as much as this budget did.
Consultation matters The Finance Minister has this year listened, and around 70% of the Budget is based on proposals made by interested parties, leading the GRTU. A clear indication of the several proposals made by the GRTU and taken up in this year’s Budget is the introduction of extensive support schemes that reach out to the smaller enterprises including small traders and the self-employed. Government has also taken on board the immediate introduction of the eco-contribution exemption scheme and the removal of the €16.31 levy on credit cards.
Government has addressed GRTU’s concerns with an €80m vote for enterprise, with a good chunk going to the smaller and micro enterprises such as retailers and traders, through various assistance programmes, funding for cash flow problems and capital investment, renovation projects, tax credits, the setting up of a fund for advantageous loans and new projects targeted towards the areas earmarked by Government. These finally address the many issues on which GRTU has had Government’s commitment pending for many years.
Diversion of work GRTU is particularly satisfied that Budget 2010 is following the lead of GRTU in creating incentives for the diversion of work, especially back-office work and tourism support schemes, to the localities. GRTU strongly believes that Government should strive harder to turn the localities in viable economic entities.
As previously explained, GRTU is not against the weekly €5.82 cost of living allowance, although it would be a dip in the pockets of many employers. We believe enterprises are being helped in many other ways to partially make up for this expense and at the same time this would give people more spending power, with the money likely to go back to small businesses. Indeed GRTU is satisfied that Government is also extending the full COLA increase to pensioners as they are today form a very important part of the consuming public.
The commitment made to the Small Business Act, the only once principle and the long awaited one-stop-shop, other GRTU proposals, give certainty and facilitate the life of SMEs, joining Europe’s commitment and that of other European leaders. Small and micro enterprises represent not only the majority of enterprises in Malta but also 50% of the labour force employed.
GRTU is also pleased to see Government addressing unemployment through what will be manifested in advantageous schemes for both employers and jobseekers. The human resource is Malta’s most important resource and therefore good resources cannot be wasted. GRTU has long insisted that not enough is being done to help young people, especially boys, leaving schools without further education to help these young people obtain qualifications that make them suitable for a working life. The work trial scheme, which will give unemployed people the opportunity to be integrated in a workplace for a 12-week period, would also allow employers to test potential employees before giving them the job.
The schemes that provide work training for youths 16-20 year olds is very commendable. These schemes are of particular interest to the owners of small businesses as, unlike the manufacturing sector, during the recession period, small enterprises continued to support their full employment compliment and this help together with the tax credits and the micro-credit scheme will help smaller firms to renovate and increase employment.
Pharmacy of Your Choice GRTU, being one of its major architects of the Pharmacy of Your Choice scheme and as the national representative of owners of pharmacies in the community is extremely pleased with the extension of the Pharmacy of Your Choice Scheme. Despite criticism, people who used to queue to pick up their medicines are now going to their private pharmacy. There is no comparison in the service. GRTU will continue to strive so that the POYC is extended to the whole of Malta in the shortest possible period.
Fair Competition GRTU agrees with the further empowering of the Office of Fair Competition as GRTU has always insisted that fair competition and consumer protection should not have been lumped into one institution and that the Fair competition office should be autonomous from Government. Many businesses are, or should be, safeguarded by this office and therefore it is essential to have it functioning to its best. We are not against the strengthening of the consumer protection agency as we believe that professional retailers will not suffer.
Price control We are however concerned that Government is once again picking up phrases like “mandatory price impositions” and “price watch”, which smack of an anti-retailer mentality of olden days and represent “anti-inflation” tools that are not supported by any statistical evidence to prove that the high rate of inflation we suffered over the last years was due to any trading or retailing manipulation. Indeed as the Budget economic projections indicate that inflation in Malta will next year go down to 2%, which is more than acceptable in a competitive economy like Malta.
As GRTU has been saying all along on this issue, it’s “much ado about nothing”. GRTU expects Government to discuss this matter with us in detail as no consultation what so ever has as yet been held.
Waste management Government also tried to make good for the introduction of the eco-tax by relieving companies from taxation for waste material if they already subscribed to a scheme with some other organisation, having the money they pay really being used for the collection, recycling and disposal for the waste they generate. GRTU is the only national organisation that has invested heavily in waste management and today GRTU, through its subsidiary Green MT, already recovers 1,424 tonnes of recyclable packaging materials on behalf of Green MT member who put on the market 1987 tons of recyclable packaging material. GRTU therefore has been the prime mover to ensure that businessmen subject to eco-taxation will not have to pay twice (eco-tax and scheme contribution). The fact that Government has now decided to commence the process of exemptions from eco-contribution for scheme members is of great win for GRTU.
Utility aid We are pleased to see Government helping families counter the price of water and electricity and with initiatives for alternative energy. One must keep in mind that GRTU represents not only businesses but also their families as their livelihood depends on the going of their business.
While GRTU is happy that Government has accepted its recommendation to extend the five-year option period on property transfer final withholding tax of 5% to seven years, GRTU is not satisfied that the full package of recommendations made by GRTU in support to the construction industry has been put aside by the Ministry of Finance. GRTU believes that the Minister for Finance should, as advised by GRTU, have taken the opportunity to take the new financing schemes to promote development which is desirable to get the economy moving in the direction indicated by Vision 2015 Government projects.
Construction measures GRTU will be continuing discussions with the Ministry of Finance to ensure that more incentives are provided for developers in the construction industry. GRTU is however satisfied with the high capital investment budget and more especially with the widespread list of project that are being included in this capital investment programme. The construction industry and civil engineering sector will greatly benefit from the boost this extensive capital investment programme will provide and from the various schemes Government is launching to support enterprises.
Vehicle registration GRTU is happy that Government is removing the car registration taxation on Eur IV and Eur V low emission commercial vehicles but is concerned that Government has not fully consulted GRTU on this scheme, as the proposals as included in Budget 2010 will negatively impact on commercial vehicle importers who have in stock large quantities of vehicles that will suffer the hefty car registration tax applicable to below Eur IV emission standards. GRTU is also concerned that the licenses of the large fleet of commercial vehicles now on the roads will go up unless distributors, contractors and transporters opt to benefit from the incentive package for renovation and re-investment, and go out to purchase newer Eur III or Eur IV vehicles.
Job creation The €80 million in incentives to favour job creation and economic growth, as well as the €228 million being invested to strengthen the economic infrastructure of the country makes budget 2010 highly satisfactory. The €1.3 billion which is being invested in health, education and social services make Budget 2010 not only economically acceptable but also socially just.
It is correct for Government to use one Budget after another to further its commitment to its Vision 2015 targets and not to deviate substantially as a result of the economic slow-down. GRTU is particularly satisfied that Government is not swallowing the bait of many who had advised an extension of national debt through the widening of the national financial deficit.
GRTU strongly believes that the economy can, with the right incentives, meet the recession challenge and be able to renovate and restructure and re-invest in new creativity and projects without the need to indulge in fancy financing as represented by an expansion of Budget deficits and public debt.
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