Torturing Taxpayers

The Malta Independent 

Is there no end to torture for taxpayers? After seeing systems being sharpened to ensure that all tax dues are extracted instantly, after having tax breaks on fringe benefits practically removed, after enduring the collapse of tax brackets causing the highest marginal rate of tax to be reached at an earlier point in the progression of income, after seeing most government services being hiked up in price, the taxpayer was expecting a respite. This was more than a reasonable expectation seeing that a PN election billboard assured us that government finances were in good shape.

But revelation that government finances are (and I hasten to add have been for several years) in a crisis removes hopes for respite and darkens the prospect for further tax torture given that the government has assumed expensive obligations of compliance for EU membership.

That is bad enough as it is. But what absolutely blew my top off this week is revelation by Maltapost Chief Executive that “The government has decided to assist Maltapost in their reforms and agreed to absorb 160 ex-government employees”.

In assisting Maltapost to take back 160 employees government is committing itself to fund a further expenditure of around Lm1 million. These workers are clearly unneeded for the operation of government service. If anything government needs to trim its own workforce in the grades that these employees can fit into.

Maltapost is owned 60% by government and 40% by NZ interest. The NZ company have full control of Maltapost operation through a management agreement. They get paid handsome management fees for running the company and in fact the privatisation of their equity stake produced no revenue for the State as its value was bartered against the management fees and capitalised into the company. So the NZ shareholders made little or no cash investment in Maltapost and they certainly did not put their money where their mouth is. They can only win from their participation in Maltapost. They have nothing to lose except their reputation which in any event is far from stellar.

So why may I ask, should the government take on itself a financial obligation of Lm1 million to relieve the pressure from Maltapost to restructure without government subsidies? Taking on unneeded workers is pure and simple subsidy by the backhand.

Maltapost registered a loss of Lm83 k for financial year to Sept 2002 and expects to slip into profitability during financial year to September 2004 if it gets relieved of 160 employees on its payroll. So basically we are being told that Maltapost can only achieved profitability if the Maltese taxpayer shoulders the burden of 160 employees.

There is something odd. When Maltapost was created in May 1998 it went into immediate operating profit although it had 900 employees, the postage charge was 17% cheaper than it is today and government was being given a 60% rebate on its own postage bill. When in the course of privatisation of Mid-Med Bank the government bought back the latter’s 45% equity holding in Maltapost it paid a premium over the nominal price reflecting the profit accumulated till then (April-June 1999).

So why should Maltapost with 774 employees rather than 900, with a higher postage rate, with over-milking of the philately potential, with government paying normal postage rates for its requirement, and with exceptional postal volume generated by the dual election campaign, still be out of profit in financial year 2003 and requires state assistance to achieve profitability in 2004? Why should the Maltese taxpayer ease Maltapost into profitability net of the lucrative management fees that the NZ team are charging the company?

What specialisation is needed to run a monopoly with a free ticket to cut costs by dumping unwanted personnel on the Maltese taxpayers’ bill? Is my memory failing me recalling promises of attraction of international postal business to keep all employees productively occupied and justify the NZ management fees? Who’s defending the taxpayer?