The wide-ranging income tax cuts promised during the electoral campaign will need to be reviewed in light of the wider economic scenario prevailing at the time of the next budget’s formulation, Finance, Investment and Economy Minister Tonio Fenech said yesterday.
Mr Fenech, who yesterday launched the consultation period for the next pre-budget document, said it was still early to commit to introducing the income tax revisions announced by Prime Minister Lawrence Gonzi during February’s electoral campaign, which came as part of a wider economic stimulus package, and that a decision would be taken following consultations with Malta’s social partners in the lead-up to this autumn’s budget.
The income tax revisions listed out by Dr Gonzi included an upward revision of the 15 and 25 per cent income tax bands and a reduction in the maximum 35 per cent income tax rate to 25 per cent for those earning up to €60,000 per year.
The promised cuts, which would mark another substantial reduction in income tax burdens for a third year running, will also need to be reviewed in light of the extent of financial turmoil arising from areas such as food price increases driven by grain and cereal shortages and the constantly rising price of oil, Mr Fenech said.
The price of oil, Mr Fenech stressed, this week hit a new record high of US$122 per barrel, with commodity experts forecasting the price to be driven as high as US$200 a barrel later this year.
Toward combating the situation, Budget 2009, Mr Fenech said, will include a full plan on renewable energy development, with a two-pronged aim of reducing Malta’s dependency on oil while also meeting the EU’s 2020 target of reducing greenhouse gas emissions by 20 per cent.
The issue of renewable energy – along with the creation of ‘sustainable localities’, ‘healthy enterprise’ and fostering a better regulatory environment for businesses – were described yesterday by Mr Fenech as the four most critical themes to be borne in mind when addressing the challenges the country is facing.
Playing an important part in each theme, he added, were the government’s three main development pillars of employment, education and environment.
Mr Fenech stressed that while the four themes will be central elements to the budget and the primary areas up for discussion in consultations, government work on a number of other areas is also ongoing, while the consultation process itself is expected to provide plenty more food for thought.
The consultation period is expected to be wrapped up by mid-June and the pre-budget document should see the light of day come July or August, after which what Mr Fenech described as “intensive” pre-budget discussions between the government and Malta’s social partners will begin in September around the Malta Council for Economic and Social Development table.
Asked how fruitful the pre-budgetary exercise, which was formulated four years ago in lieu of the failed social pact talks, has been, Mr Fenech said the government had learned from the social pact experience and that the new consultation process has proved itself to be of “great use”, citing far greater budgetary consensus since the process began.
The process, he said, has also resulted in more effective and relevant budgets with far less post-budget confrontations between the government and social partners, since all cards were now being placed face-up on the table before the budget speech.
In terms of Enterprise, the consultation period will seek to establish the best way forward on the six sectors targeted by the government’s 2015 vision – health, manufacturing, tourism, financial services, information technology and education.
Under the heading of sustainable localities, the government is looking to reduce the environmental burden and traffic congestion in areas such as Valletta and Sliema - and to as lesser extent that in others areas such as Mosta, Birkirkara and Hamrun. This could be done by attracting potential businesses to non-traditional business localities so as to provide employment closer to home. Through the consultation, the government will be looking to see what improvements could be made to cultivate the concept of ‘local’ investment while at the same time consider any potential negative effects.
On the issue of Better Regulation, Mr Fenech said the idea was to foster the notion of ‘red carpet, not red tape’ philosophy for Malta’s businesses since the country’s regulatory environment influences competitiveness and job creation capacity. By reducing red tape, the government believes entrepreneurs can improve their competitiveness. Through a better regulatory environment, the government will be looking to secure better opportunities to prosper and help consumers enjoy the full benefits of the internal market.
While feedback during the consultation period will be received by phone and email, a series of public consultation meetings will also be held – two in the form of business breakfasts and two as seminars.
A business breakfast to be held tomorrow will address the issue of Enterprise, two seminars on 20 and 27 May will treat the respective subject matter of Sustainable Localities and Renewable Energies while a final business breakfast on 5 June will deal with Better Regulation.
For more information on the consultation process, the public can phone 2599 8244 or email [email protected]