We all know about keeping up with the Joneses or the hypothetical Borgs – the mania to have as good a car (preferably better), a better Holy Communion party for the kids, a fancier wedding – the list is endless. Yet for those who potentially have a reasonable income in Malta, this keeping up with the Borgs is saddled with another inconvenience cum injustice. It’s quite simply that in Malta today there are two types of middle classes (if one is going to divide class by income) – those who have to pay every last cent owed in tax and those who can avoid some or even most of the tax they owe.
This obviously has a huge impact on your disposable income and lifestyle. So when the government hears that the middle classes are feeling very angry, or despondent, or frustrated by the tax burden, it is important to realise that those who are really suffering an injustice are those of the “we have to pay our taxes kind.” Essentially those who can find means of not paying their taxes, or all the taxes due, are obviously suffering far less, as ways can always be found to avoid a little more tax to make up for the rising cost of most things.
And I can understand why the government might be a little sceptical that the middle classes are finding the weight of taxes very burdensome. After all, the same restaurants are always packed, there are hundreds of new cars on the roads, house prices are rising dramatically and people are still paying these prices, and a host of indicators which would suggest: “Where’s the problem?”
Well, of course, there really is no problem – money really is no problem for that very happy group of middle-class people in Malta who do not pay their taxes as they should. Life is really fine. They can easily plan holidays to wherever, they can easily cover all the bills, they can easily have every comfortable lifestyle.
But the others, the Borgs who are paying their taxes, are having a very different experience indeed. Take the case of a family of five living on a wage of Lm12,000 per annum, who are part of that 2,000 who have to pay all the tax due because they are employees and every cent is declared. If they are sending their children to private schools, which they invariably are, if there is no extra wealth from the husband or wife and if, God forbid, they also have a loan, they are not comfortably off at all. Do you think families like this can easily go on holiday – except to Gozo, of course? Do you think these people are buying cool clothes? Well maybe the kids are but mum isn’t, for sure, and the tiredness and frustration shows.
These are traditional core Nationalists who do not understand why they have a family wage which is more than double the national average, and yet they cannot keep up as they should.
Even if you are lucky enough to get one of those cheap flights you find that the taxes due are more than the flight anyway, so what looked like a great deal just isn’t. And perhaps, by the next budget, a way could be found for us to enjoy these cheap flights for once. Could the government, for example, not peg the level of tax to the cost of the flight so that if you do get a cheap flight, you pay a lower level of airport tax? As it is, those who pay club class and those who don't, pay the same additional tax on the fare, which is hardly right!
If you believe the statistics, there are around 2,000 employees who declare they earn over Lm12,000 per annum. Yet, there are only a derisory 200 (yes two hundred) self-employed who do the same. Tonio Fenech, our finance parliamentary secretary recently declared that he estimates the tax the government collects is around 65 per cent of what is due. Now that is obviously an educated guess.
But I would be far more interested to hear what he estimates the tax compliance to be among certain professions such as electricians, plumbers, lawyers and doctors, to name just a few categories whose names I’m just taking out of a hat and against whom I have no particular grudge.
And that’s the bottom line in Malta today. If you are an employee on a highish wage of Lm12,000 plus, or you are one of the self-employed who employs many others and who has to declare most of your income, you’re clobbered. You feel and are broke. On the other hand, if you are one of those lucky and happy middle classes who earn who knows what and declare ever so little, you feel, and are, very comfortably off.
When deciding on strategies, budgets and tax levels, as well as keeping votes, this great big tax divide needs to be kept very much in mind!
Marisa Micallef