The announcement made by Prime Minister Lawrence Gonzi during a public dialogue meeting in Birkirkara last Wednesday is extremely significant.

Dr Gonzi said that if the government reaches its fiscal targets for this year, it would reconsider changing the departure tax that had been increased last August from Lm10 to Lm20.

He said last year’s increase in the departure tax had been necessary in the context of the government’s programme to bring public finances back into shape.

The measure received criticism from all quarters, even by Nationalist MEP Simon Busuttil, who had immediately said that the tax should be reduced or eliminated altogether “because it is incompatible with basic principles of EU membership, most notably with the free movement of people”.

The move also had a negative effect on the number of people travelling abroad by air. According to figures published by the National Statistics Office, 15,000 fewer Maltese travelled abroad in 2005 when compared to the year before. Observers believe that this drop could be attributed, at least in part, to the increase in the departure tax.

There are other factors to take into consideration.

First of all, Dr Gonzi’s announcement could be interpreted as a statement that public finances are back on track. In fact, what Dr Gonzi said was that the departure tax could be revised only if the government’s financial targets are reached and, therefore, once this revision is made, the government would be indirectly sending an important signal.

On the other hand, if the departure tax is retained as it is now the government would be admitting that fiscal problems still exist.

This could lead one to think that the government is already inclined to reduce, perhaps remove, the departure tax. The government would have been careful not to say anything about the tax if it did not intend revising it.

Secondly, the government must have realised that the increase in the departure tax has backfired. If people are travelling less because of such a tax, then government revenue from it could actually decrease even though the tax was doubled. Therefore, if the tax is reduced once again, the government would be encouraging more people to travel. The public finances issue could here be regarded as just an excuse for the government to go back to square one once it became clear that the increase in the departure tax did not have the desired effect.

A third consideration is coming mostly from the

pro-Labour flank. With the legislature past the halfway mark and with elections looming two years ahead, a reduction in tax could be perceived as an electoral gimmick to try to win over a few votes. It is often said that governments tend to be strict in the first half of the legislature and try to make up in the second half, and a reduction of the departure tax would be very much in line with this kind of thinking.

If the departure tax is reduced, the government could then say that fiscal measures had been taken to reduce tax burdens on the people, while the opposition would be quick to reply that the government was only admitting it had made a mistake when the departure tax had initially been raised.

Politics is also about timing. If the government will eventually reduce the departure tax, this will in all probability take place in 2007, giving it enough time for the measure to have the desired effect on the electorate.

Having said this, it must also be pointed out that the outcome of the next general election will in no way swing one way or another because the departure tax was removed or, more likely, reduced. There are far more important issues on which the electorate will think hard before giving its vote to one party or another.