Finance Minister Edward Scicuna this evening announced a 5 cent increase in excise tax on cigarettes but later on denied that there would be an increase and insisted that the government only wanted to address a loophole in the taxation system. A few minutes later, Prof Scicluna retracted the amendment and said that the issue would be left for another budget.

The Finance Minister was speaking during the debate at committee stage on the Budget Measures Implementation Bill. He said that the price of cigarettes should have increased by 15 cents after the increase in excise tax announced in last November’s budget but importers had raised the price by 5 cents over and above that amount. Excise tax was meant to differentiate between high and low-value cigarettes but importers had found a loophole and had increased all prices by the same amount, pocketing an extra 5 cents that were supposed to be collected by the government. For this reason, the government was proposing an increase of 5 cents on excise duty in cigarettes to make up for the difference.

Former Finance Minister Tonio Fenech lashed out at Professor Scicuna, insisting that this is not the way to correct a loophole. He said that the price had been raised by more than the intended amount because the Finance Minister failed to give the correct amounts in his budget speech. Importers were not told in terms of cents what the increase in price should have been and, as a result the government and importers had worked out different amounts. “Instead of keeping the price of cigarettes in check you are proposing to increase the tax to make up for your mistakes.” The PN MP also argued that, in the end, consumers would have to shoulder the increase in tax.

But the Finance Minister insisted that the government can only announce a change in excise duty. It cannot decide on the market price. Throughout the sitting, Professor Scicluna seemed unprepared to answer questions by PN MP Tonio Fenech and had his microphone switched off for minutes at a time while he consulted with his advisors. Later on in the sitting, the Finance Minister denied having announced an increase in tax and explained that his aim was only to correct the loophole so that the government would collect its dues, as per the budget projections.  He insisted that cigarette prices would remain unchanged.

But, surprisingly, after a number of interruptions and after consulting with his advisors, the Finance Minister backtracked on everything he had said and announced that nothing will change for the time being and the issue will be left for the next budget. The experts had advised against the amendment because of complications that could arise from such changes.

All types of cement now taxed

In the meantime, Parliament also approved an amendment by which all types of cement will be taxed. Professor Scicluna said the amendment was aimed at combating tax evasion. He said that up till now, importers of Portland cement were evading tax and this amendment would close another loophole.

PN MP Tonio Fenech insisted that importers were not actually evading tax but rather importing a type of cement that was not taxed. He accused the Finance Minister of not thinking the budget through and introducing new taxes six months down the line. “You are not closing a loophole. You are just introducing a new tax,” Mr Fenech insisted.