“This is a positive factor in itself,” he added. After Malta’s EU accession, government anticipated a fall in VAT revenue since this was no longer collected at the point of entry but was now being received only at the point of sale.
VAT revenue is, instead, meeting expectations and possibly going beyond what had been estimated, Dr Gonzi said. The fact that revenue from VAT was on target means that consumption levels are also healthy.
Income tax revenue is also as planned, which suggests that the income for the rest of the year should follow suit.
Dr Gonzi was speaking at the end of a day-long meeting for ministers, parliamentary secretaries and other officials, including Nationalist Party general secretary Joe Saliba, and EU permanent representative Richard Cachia Caruana. The meeting, held at the Girgenti palace, focused primarily on the budget for 2005.
The prime minister said that with regard to public expenditure, it seems that the government is not meeting the targets set for this year. This may interfere with plans to keep within the scheduled yearly deficit of Lm95 million.
In this connection, there were discussions during the day on measures that the government will be implementing to rein in its expenditure in ways that will help to meet the targets.
The coming budget will be set in the context of a longer strategy for the period 2005-2010, Dr Gonzi said. This economic strategy will help identify priorities and the areas in which the government should invest its resources. The key area will undoubtedly be economic stimulation and job creation.
He said that there will be a specific focus on job creation in Gozo.
Asked by The Malta Independent whether a five-year plan was a bit too long in view of the fast-moving international scenario, Dr Gonzi said that the plan included short to medium-term measures, and that, on the contrary, the government should be looking further than five years and have immediate budget measures placed in the context of these longer term plans.
“We discussed the budget initiatives we may be taking for 2005 in such a way that by the end of the year we will be able to meet the targets set in the EU convergence plan.”
The social pact discussions going on at the Malta Council for Economic and Social Development were also on the agenda yesterday in view of the fact that the 2005 budget may include measures that arise from the MCESD talks.
“We will be focusing on specific measures that stimulate the economy by making life easier for businesses by removing bureaucracy without adding more burdens on the sector. We will be giving specific emphasis to the services sector, especially tourism, as well as education and the environment, which are becoming key areas in the plans for the next five years.”
Asked how the statement “not to add more burden on the private sector” fits in with the recent passing of the eco-contribution bill, the prime minister said that the bill was part of the 2004 budget plans.
The prime minister was also asked about the presence of Mr Joe Saliba, and whether it was appropriate, since he is not a member of the cabinet. He said that Mr Saliba was the connection between government’s discussions and the political party. “After all, this is political decision,” he said.