Malta’s Finance Minister has said that the government will not create any new taxes or raise any tax rates. On the other side of things, he said that the government has no intention of reducing any tax rates.
The minister said this during an interview with The Malta Independent on Sunday. Some had hoped for reduced taxes, indeed it was even a proposal made by one of the social partners. A good argument regarding the VAT was made, that given the way the VAT works, it could be reduced and the government would still be able to earn the amount it had projected, due to the rising prices of goods.
But the minister made a strong point, “government has to have the necessary resources in order to finance these extraordinary expenditures.” The sheer amount of public funds being spent on subsidies is massive, and is definitely needed.
Where would we be if we had to pay energy and fuel prices based on the current international prices? Many would struggle, badly.
The minister also indicated that in terms of capital expenditure for next year, it will be higher than this year. "But, a significant amount of the funds, I would say around a third, will come from EU funds.”
This way, he said, Malta could use more funds for the subsidies.
But what about more long-term projects, major ones which many believe are just pies-in-the sky?
Well the minister was asked about two in particular, the metro and the Malta-Gozo tunnel, whether they are to be scrapped, pushed back or to provide details as to what will happen to them.
"Well, I'll just reply with a smile to your question,” he said. Asked to elaborate, he said: "It's quite obvious no? It's about priorities."
The minister did not say it, but it is clear that a metro system and a Malta-Gozo tunnel have been put aside, at least for the time being.
And thus it seems that the government is reprioritising, and rightly so. There is a time for the consideration of such major projects, but when facing a global crisis like the one today, such things need to take a step back. Of course one hopes that investment in reducing the cars on roads by other means does not stop, and that investment in green infrastructure continues without being hindered. Let’s not forget that pollution and traffic are two immediate issues which can have far-reaching effects in the future also.
Another issue that has been of concern is public sector employment, not regarding teachers, nurses and other such essential staff of course, but when it comes to other, non-essential staff.
Minister Caruana said: "The way things are evolving in terms of government's recurrent expenditure and the constraints that are arising because of new commitments, all of them exercise their pressure on government expenditure and how the money is spent."
“I do anticipate that in the coming months and years government will have to reprioritise, even in this area,” he said
Asked whether he envisages a shrinking of public sector employment, he said: "Well perhaps, if it doesn't shrink, at least it would remain stable."
About time. Realistically speaking, such an approach should have been taken years ago. There are just too many people being employed by the state, and this is having a direct impact on the private sector also.