The news that one of the world’s largest internet betting companies (as well as some two dozen other operators) will be relocating to Malta in the coming weeks is good news for our economy, and even better news for public coffers.
Over the past five years Malta has become a leading centre for this business activity, so much so that we already account for about 10 per cent of global on-line betting activity. With the new arrivals this could quite easily double.
The benefits to our economy emanating from this activity aren’t immediately obvious, because these companies operate to a large extent out of our sight. However I assure you they are quite substantial. They employ hundreds of people, and now the collective headcount will probably surpass one thousand once the new businesses are up and running. What is more important from the economic front is that these companies pay salaries way above the local average. Indeed the salaries they offer key personnel have resulted in a rise in the salaries of professionals like accountants and IT specialists. Further, the economic activity of this sector is all export-oriented and they bring in very substantial amounts of foreign currency.
Perhaps the biggest winner from this activity is our Treasury, because these companies also pay significant amounts of betting taxes. In 2005 they paid a total of Lm18 million, increasing to Lm22 million in 2006. Apart from gaming taxes (that are payable on bets placed) these companies also pay company income tax on their earnings of 35 per cent. With the arrival of the new companies in the latter part of this year, tax revenues in 2008 should shoot up very significantly. I believe that the next government will be enjoying a tax bonanza!
However, there is also a risk attached to this sector, one that government would be foolish to ignore. The reason why so many internet betting companies have located in Malta, is not because we provide some inimitable competitive advantage, but because we have a legal and fiscal framework that makes it attractive for them to pocket their bets here. “Clever us!” one would be tempted to say. However this situation is not guaranteed to last forever. An enforced change in legislation, perhaps triggered by the EU, could erode the competitive legal and fiscal advantages we offer, as a result of which we could lose additional business, or worse, lose existing operators to alternative jurisdictions. These companies can, regretfully, leave as quickly as they came.
While this is not likely to happen it remains a possibility that should not be ignored. The obvious risk if this were ever to happen would be the loss of good employment to potentially thousands as well as the loss of a significant slice of our GDP. However, the more critical risk is the loss of substantial revenue to government. Betting taxes and related income tax will, in the next few years, become an every more important component of state revenue. If government becomes highly dependent on this stream revenue to meet recurrent expenditure (like government salaries, pensions and healthcare spending) we may run the risk of a fiscal crisis if this stream of revenue were ever to dry up. The responsible thing to do with this money is therefore to treat it (or a good chunk of it) as extraordinary revenue. It would we wise to then apply it to one of two purposes; either deficit reduction or towards supplementary capital expenditure programmes, e.g. alternative energy investment or a serious 21st century upgrade to our public transport.
This way, if ever we lose our competitive advantage for the betting sector, we will not have problems paying our bills. Government should take note.

The suggestion made last week by Alfred Sant to grant additional powers to the MCESD through the appointment of its chairman to the cabinet, is one that government should not pass over. Whilst I do have some reservations about an unelected person being appointed minister, I have none when coming to agree that the MCESD should move on from its purely consultative role. The Greens certainly welcome such non-partisan proposals. It would be wise of Dr Gonzi to bury his pride and take heed of this suggestion. Something, however, tells me that he will not.

Edward Fenech is spokesperson for Finance and the Economy of Alternattiva Demokratika – The Green Party