The day after Prime Minister Lawrence Gonzi went to President Eddie Fenech Adami’s office to dissolve Parliament and call an election, the Nationalist Party threw its first trump card on the table – if the PN is re-elected, it will continue reducing income tax, Dr Gonzi had told journalists.

Dr Gonzi had then said that a new Nationalist government would, if re-elected, among other things reduce the maximum 35 per cent income tax rate to 25 per cent for those earning up to e60,000 (Lm25,758) per year.

For two consecutive years – the budgets for 2007 and 2008 – the PN reviewed the income tax bands to the benefit of the workers, moves which were welcomed across the board, even by employers who believe that the more people have money to spend, the more the economy will grow.

On that day, 5 February 2008, the Nationalist Party made a first, big step towards winning the election. The promise was being made by a party that had already implemented something similar and, what’s more, it had also not introduced any new taxes.

Such moves have worked brilliantly. The money that the government “lost” because it reduced income tax was raked in anyway as the people spent more. In a way, the government took a risk, and the risk worked well as the income tax reform, while leaving more money in people’s pockets, did not lead to a drop in government revenue. On the contrary, government revenue increased.

This was a clear example that people are more likely to spend if they earn the money to do so. The more belts are tightened, the more the people will be careful with their cash, spend less, and the economy will stagnate.

What happened last year seems to be working this year too. Recent statistics published by the National Statistics Office show that government revenue from income tax in the first two months of this year has increased – and this is spite of the government actually reducing the amount people have to pay.

The government now has to keep its promise, and implement what Dr Gonzi pledged before the election. It is normal for governments to be rather stingy, perhaps worse, with the electorate in the first two or three years of a legislature; and then to try to make up for it in the second half of the five-year-term.

But it would be wrong for the government to act this way just because we are in the first few months of a new administration. Now that the economy is moving, it would be a bad idea to slow down the momentum. We all know how hard it was to reverse the trend a few years ago.

It was therefore positive to hear the Prime Minister say, in an interview with The Malta Independent on Sunday, that the government intends to maintain its commitment on the revision of income tax as from the first budget it will be presenting, sometime in October.

Given the prevailing economic scenario, the government would be giving a further boost to the country and is expected to recoup what it would be giving out – some e46.6 million – in a matter of just two years. The more optimists believe that such a sum could be recovered in even less time.

Of course, the government might choose to implement its promises in stages – that is cutting down on the maximum rate and adjusting the other bands gradually. But, whatever the case, the road that the country has embarked upon in the last two years – and the fruit of which is being enjoyed by one and all across the board – should not be abandoned or temporarily halted.

In a globalised world where competition is tough, any hesitation could have a negative impact.