The Malta Independent 7 December 2024, Saturday
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TMIS Editorial: Populist tax cuts a camouflage for a government in difficulty

Sunday, 3 November 2024, 10:00 Last update: about 2 months ago

The Labour government knows how the average Maltese people think. It is aware how easily it can please them and sway their line of thought. Tell them they will have more money to spend, and they will turn a blind eye to anything else. Post them a cheque or a voucher, and they will adore you. Give them some free entertainment, and they will follow you. Panem et circenses in truly Roman mode.

This is what probably went on during Cabinet meetings that discussed the way ahead as the government was preparing its budget for 2025, which was presented last Monday. Shorn of ideas as to how to release the country from collective suffocation, it came up with a single way how to push attention away from the real problems: a tax cut.

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The Labour government does not know how to counter the self-inflicted over-population matters putting a massive strain on the infrastructure, environment, health, education and social sectors. It does not know how to stop the influx of foreign workers doing menial jobs (with due respect to them) while accommodation issues lead to more and more construction woes. It is unable to diversify industry to sectors that are more value-added than labour-intensive. It does not know how to bring in fewer tourists who spend more, and gladly boasts of rising numbers and records which, yes, have helped the economy turn but which have added to the daily burdens residents face. It does not know what to do to resolve the growing energy and sewage deficiencies. It does not know how it's going to tackle the traffic issues that, day in day out, are causing so much frustration and leading to the loss of thousands of man-hours of productivity. It is unwilling to stop the unbridled development taking up every green corner.

So someone must have thought that the best way to go about appeasing the public is by offering tax cuts. One can almost hear the ministers' "hear, hear" around the Cabinet table as they nodded their approval for the populist measure.

Labour knew that the changes to the income tax regime would be the most talked-about subject after the budget is presented. So much so that, in the weeks leading up to it, Prime Minister Robert Abela raised expectations high, indicating that this was the focal point of this year's financial exercise. He knew there was little else in the budget and wanted to draw attention to the widening of the tax bands and the reduction in the amount of money workers will have removed from their salaries and passed on into the government's coffers.

And, one must say, he did manage to get the people to focus on that one, single measure that was announced. One can almost imagine how many scrambled to find a calculator to determine how much they will have "extra" as from next year. They did not care about what the rest of the budget offered, other than the usual taxed Cost of Living Adjustment, and the rise in children's allowances (if they still have minors in the home) or pensions (if they rely on this assistance to live).

Someone then must have thrown in the word "quality" in the midst of the Cabinet discussion and, there you go, the budget was ready. Another buzzword - it was mentioned 27 times during last Monday's 150-minute speech - that will be repeated over and over again to instil the feeling that things are planned to get better.

At least, the government has finally realised that it needs to move away from the current economic model to one that is more sustainable. Constituted bodies have been telling it to do so for years. Even the Finance Minister himself had spoken about it, but it is only now that he has managed to convince his colleagues that such a change was needed.

It has taken the government years to acknowledge that Malta is experiencing this kind of situation. But a more difficult part comes now: because it is one thing to say that we need to move from quantity to quality, and it is an altogether different thing to actually implement the change.

This is why the Chamber of Commerce did not buy the government's plans. The budget, it said in its first reaction, does not address quality. It is a missed opportunity, it added, to introduce key measures to address key issues, going on to compile a long list which includes productivity, waste management, sustainable tourism, over-population, transport and traffic, and over-construction.

In other words, the government is either unaware of the "significant challenges impacting the overall well-being and the country's competitiveness and attractiveness", or else it knows about them but has no idea how to overcome these hurdles.

So give the people a tax cut and hope for the best.

 

 


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