It has almost become a tradition that the government prepares the budget together with the constituted bodies and the public at large, and the forthcoming budget is no exception.

Gone are the days when the island would practically come to a standstill at budget time with people wondering whether the cost of tuna and corned beef would rise, It has almost become a tradition that the government prepares the budget together with the constituted bodies and the public at large, and the forthcoming budget is no exception.

Gone are the days when the island would practically come to a standstill at budget time with people wondering whether the cost of tuna and corned beef would rise, or whether the government would be announcing the formation of a military corps like the Dejma, Dirghajn il-Haddiem or Pijunieri to combat unemployment, or whether the quota on importation of motor vehicles would be adjusted, or whether the wage freeze would be removed!

We have now got accustomed to a government that plans for the long term, listens and discusses. Nowadays, a budget has become an accounting and economic exercise spiced with a substantial dose of social justice.

Now that the next budget is fast approaching I would like to put forward a few suggestions.

National Insurance contributions for part time self-employed

I feel it is high time the government introduces a National Insurance contribution that caters for part time self-employed individuals. As things stand, the lowest contribution for a self-employed is €24.88 per week. Therefore, an individual who works part time on a self-employed basis and earns say €70 per week has to pay €24.88 in National Insurance contributions (equivalent to 35.54 per cent of the income earned). I know for a fact that there are several people in this category such as commission agents working with estate agencies, cleaners, hairdressers, seamstresses, cooks, teachers and so on, who all find the present situation very disheartening. I suggest that self-employed individuals who earn less than €166 per week be offered the opportunity to pay National Insurance contributions equivalent to 10 per cent of their income. After all the government had solved a similar anomaly that existed with employed part timers, therefore I cannot understand why the government is dragging its feet in giving fair treatment to part time self-employed individuals.

Minimum wage increases

It has become customary that every budget caters for an increase in the minimum wage according to the increase in the cost of living. I consider this as a very fair and just measure and I do not suppose that anyone objects to it. However, I am of the opinion that the wage increase should not be statutory for all salaried people. I am a firm believer that wages should be commensurate with productivity and other guidelines. Hence I am of the opinion that in the case of employees who earn say over €270 per week, the wage increase should not be considered as an automatic one but should be left to the employer to decide whether the said increase should be given or not. It must be noted that unless wage increases are counterbalanced by an increase in productivity and efficiency, then an enterprise will have no other option but to increase its selling price to make up for the increase in the costs of production.

Fines

The government is duty bound to manage the country’s finances in the best possible manner. It must make sure that all receivables are collected punctually and, likewise, that all payables are paid on time. Unfortunately, it so happens that we are not a very disciplined race and unless we are threatened with the imposition of fines we tend to slack. I agree that fines should be charged to defaulters. What I totally disagree with is the amount of penalties charged and also the manner in which penalties are calculated.

It must be noted that in the case of late payment of dues to the State the government charges a penalty of one per cent per month on the amount due, which is equivalent to 12 per cent per annum. In economic terms this is an exorbitant rate that could easily be considered as ‘usury’. However, as though this were not enough, more often than not further “late payment” fines and “additional” interest are imposed. Such penalties could even add up to 26 per cent of the total due!! To add insult to injury, whether one pays his dues one day late or 30 days late one still incurs the same full penalties since the government imposes penalties on a monthly basis. This situation must be remedied forthwith. First of all the State should differentiate between occasional defaulters and continual defaulters. Moreover, the method used to calculate charges should be overhauled. Thus interest should be charged on a daily basis and not on a monthly basis.

Taxation

As we all know, the previous administration had reduced income tax rates in the last two budgets it had presented. Also, in its electoral manifesto the Nationalist Party had promised that should it be returned to power, the tax rates would be adjusted in such a way that the first €60,000 earned would be taxed at 25 per cent.

Although the manifesto did not specify when and how the measure would be introduced, I suggest that in the forthcoming budget the government starts to implement part of this promise by widening the present tax bands by a further e5000. This will help increase the individual’s spending power. Moreover, should my suggestion with regard to wage increases as suggested above be taken up, this tax reduction would help to make up for the loss in revenue.

I am aware that due to the prevailing economic situation the government may have cold feet about introducing further tax reductions. However, I am convinced that there exist several other ways as to how it can make up for loss in revenue.