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PM should have ensured that removal of levies reduced pric es - AD

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  • Ralph Cassar
    PM should have ensured that removal of levies reduced prices - AD by MARK MICALLEF The Malta Independent 1/4/2005 The Prime Minister cannot get away with
    Message 1 of 1 , Apr 1, 2005
      PM should have ensured that removal of levies reduced prices – AD
      by MARK MICALLEF
      The Malta Independent 1/4/2005

      The Prime Minister cannot get away with merely acknowledging that the removal of levies had not reduced prices as if there was nothing he could have done about it, Alternattiva Demokratika economy, finance and tourism spokesman Edward Fenech said yesterday

      Referring to an interview the Prime Minister gave The Times early last week, Mr Fenech insisted that the government’s laissez-faire attitude on such financial matters was no longer tenable.

      He said that when excise duty was abolished with the reintroduction of VAT back in 1998, the government introduced a mechanism whereby refunds were tied to real cost reductions on behalf of companies, to the extent that those which did not adjust their prices ended up losing their refund.

      “I know of a company, which for obvious reasons I will not identify, that lost some Lm120,000 in refunds because audits revealed that they had not adjusted their prices. AD would certainly not recommend direct price control. However, there are other, more pro-active, options the government can choose to contain the rise in the cost of living,” said Mr Fenech.

      Chairman Harry Vassallo also addressed the press conference and amplified this point, saying that the government should address this situation and adding that it threatens to widen the economic gap between families in the middle and high-earning classes. “It is evident that those in the middle class today are continually feeling that they are regressing economically as their spending power is diminishing due to the higher burden of indirect taxation and the rising cost of many goods and services,” he added.

      Mr Fenech stressed the part that increased property costs are having on the economy at large but more specifically on families. Property is a base factor in the cost of production, and the way prices have sky-rocketed over the past few years is reflected in the cost of production, especially in the tourism sector, he added.

      “Maltese families are having to pay western European prices for such essentials as housing, food, clothing, cleaning materials, medicines and personal transportation, when the average earnings of the middle class are nowhere close to the earnings of middle-class families in Europe.”

      The situation of many in the middle class is becoming even more unsustainable because, unlike those on lower incomes, many middle-class families cannot always benefit from certain social protection measures in areas such as housing, education and healthcare, Mr Fenech added.

      The mechanisms government has put in place to ensure competition are not enough. Informal cartels still exist and this limits competition, he added. In connection with this point, Mr Fenech praised the government’s plans to liberalise cargo handling, as this would significantly reduce the cost of carriage. However, he stressed that the benefits of this liberalisation have to go to the consumer and not the importer.

      If not, he explained, consumers, as tax-paying citizens, will be losing out from both ends. “On one hand they will still keep paying regular prices as if no liberalisation had taken while on the other hand, a portion of their tax would be directed towards the social benefits of those workers who lose their job as a result of the restructuring process.”

      Mr Fenech insisted that, if necessary, the government should introduce a penalty scheme or some other mechanism which ensures that the retail price reflects the changes resulting from liberalisation.

      Dr Vassallo spoke of the cost of personal transport. He criticised the fact that the government had increased the price of public transport by some 33 per cent in the last budget, saying that this indicated that there was no proactive policy tackling the problem of transportation.

      Making a random calculation, he said that if one takes each vehicle to cost some Lm5,000 and then multiplies that figure by some 250,000 cars – more or less the number of cars registered to the Maltese population – the end result is some Lm1.2 billion.

      This sort of investment in personal transport is absurd when one considers that the country does not have any direct interests in the production of vehicles as do larger countries. “In a country with physical limitations like ours it does not make sense to have a culture for cars equal to that in, say, California,” he stressed.

      The government’s stand on the matter so far has simply been to accommodate the prevailing culture, even though studies made by the Transport Authority show that there will probably be a crisis in the transport grid due to congestion in a few years time.

      Concluding, Dr Vassallo said that while it seems that improvements have been made in regard to the country’s deficit, the government is being irresponsible when it ignores the day-to-day economic hardships being faced by Maltese people.

      It is evident that deficit reduction has distracted government away from its other responsibilities, especially those relating to the standard of living. “In recent years, the decline in our economic well-being has been the unexpected by-product of government’s drive to rectify a deficit problem for which this same government has primarily been responsible. Government must assume a more proactive role in the economy – it can no longer be left to run on autopilot,” he ended.
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