“Although I have already expressed my satisfaction for the tax credit scheme, I have also already expressed my scepticism about the micro-credit scheme. When nationalist governments indulged in credit schemes in the past they went berserk. Indeed very little was ever recouped of what was actually loaned.”

As a counter-balance to the hike in the utilities tariffs the government has now launched the much awaited micro-credit scheme and the tax credit scheme for small businesses. The schemes were announced in the last budget, although in reality they are schemes regurgitated from previous budgets and which unfortunately never saw the light of day at the time when the international recession was in full swing.

But now that the worst effects of the international recession could be waning, Government thought it fit to create its own domestic recession with the introduction of the highest utility rates in the whole of Europe, particularly for commerce and industry. The business community is already shivering at the thought of those WSC bills being neatly tucked into their office letterboxes.

Businesses were already in a quandary with the outgoing rates. Wait until they actually receive the revised ones for them to be able to fathom the extent of the cost they will be made to face. In reality the schemes, albeit late to tackle the impact of the international recession, come at a time when business needs some relief from Government-induced costs. So they should be most welcome and I will be expecting the self-employed to queue at Malta Enterprise.

Up to 28,000 small businesses could benefit from these schemes that would see their taxes slashed by e25,000 each over the next few years, the Finance and Economy Minister announced.

The Microinvest tax credit scheme will allow the self-employed and businesses with less than 10 workers to receive a tax refund on expenses made to improve their operations or take on new employees. Businesses in Malta will benefit from a 40 per cent refund through tax credits that will increase to 60 per cent for Gozitan entrepreneurs. Good news indeed.

However, from experience, the schemes are fraught with dangers. Although I have already expressed my satisfaction for the tax credit scheme, I have also already expressed my scepticism about the micro-credit scheme. When nationalist governments indulged in credit schemes in the past they went berserk. Indeed very little was ever recouped of what was actually loaned.

Firstly the micro credit scheme is a bit too little. For a loan of a mere e25,000, the type of credit the Malta Enterprise will be providing is already available to many industrial operators who obtain industrial supplies through bills of exchange which are then credited by the suppliers to the Banks at very competitive interest rates. This by no means implies that there will be nobody queuing for the credit scheme. But one hopes that they will not be queuing at the government’s doors for the wrong reasons.

While banks know very well how to deal with bad debtors and have a very effective legal machinery to recoup loans, not the same can be said in respect of Government or Government-related companies. I will not be drawn into any controversy about the numbers involved, although the minister did announce that around 28,000 business are eligible for the scheme. According to official data there are 17,000 self-employed persons so registered.

Now if only 4,000 applied for the scheme this would mean that the Government will have to fork out e100 million in the hope that some day it will recoup it. Ignore for a while the fact that they would also be entitled to a 40 per cent tax credit.

Now imagine if all the 17,000 registered self-employed apply for the loan, or worse still the 28,000 businesses triumphantly announced by the minister! He would have to fork out a fortune that could complicate his quest to curtail the deficit and public expenditure.

When I was Parliamentary Secretary for the Self-employed in 1996 I had revealed that previously the Fenech Adami administration had concocted a self-employed scheme through the ETC by virtue of which hundreds of thousands of liri had been credited to self-employed persons. Indeed the bulk of the loans were never invested in value added business but were spent on the purchase of vehicles! Many businessmen with dubious business balance sheets were sporting flashy BMWs and similar sports cars presumably for business use. To make matters worse the money was never recouped and eventually written off as bad debts.

Tonio Fenech may have scored more points in providing these schemes than Austin Gatt ever did in revising the utility rates for business.

But the Finance Minister must make sure that whichever institution is going to run those schemes will see that loans are loans and not grants.

DR GAVIN GULIA LL.D., M.P.

(Dr Gulia is the Opposition’s Main Spokesman on the Economy and the Self-Employed)