Thruth with Bad Intent

27^th October 2006
The Malta Independent - Friday Wisdom

In his famous poem Auguries of Innocence, William Blake makes a stark observation.

A truth that’s told with bad intent,beats all the lies you can invent.

This saying came to mind when the disgraced, now resigned Republican Florida Congressman Mark Foley tried to defend his sexual misdemeanours within his Congressional Office by blaming it on a 40-year-old experience where he claims he was abused by a clergyman, who, as it so happened, is a Gozitan priest.

It gains little credit to a person whom life has treated well enough to offer opportunities to reach the highest levels of US politics, to justify his indiscretions by pinning them on a 40-year-old claimed victimisation about which he kept mum for all this time.

I don’t know if Foley was truly victimised by any clergyman 40 years ago. But even if, and I underline if, Foley was victimised as claimed 40 years back by a Gozitan priest, it is poor defence for his own wrong-doing and it is irresponsible towards the rest of society that he has not exposed this clergyman much earlier when he has had ample opportunity to do it. If Foley is now saying the truth it is clearly a truth with bad intent.

The budget figures presented in parliament also carry a few examples of truths, or half-truths, with bad intent. Now that I have had time to comb through the figures it is possible to pinpoint some of these.

I will side-step the issue whether it is substantially correct to consider grants, which are only available for a limited period, as normal ordinary revenue. In the Labour’s old days these were considered as financing items, but technically now it seems acceptable to classify them as revenue, although this does nothing to alter the basic underlying truth that we have to shape up our public finances to do away with such grant revenue by 2013.

However, the assertion that the 2006 deficit is down to Lm58 million and within three per cent of GDP is only half true. How can one consider sale of government land to the tune of Lm20.4 million as recurrent revenue as if the government is going to sell land to the US government for building their embassy every year? If sale of government shares/assets is considered as a financing item for the purpose of calculating the deficit, why should sale of land be considered as ordinary revenue? If only this item is written back and considered as a financing item rather than revenue, the 2006 deficit will grow to Lm78 million, equivalent to 3.78 per cent of the GDP.

Also, how can one justify taking as ordinary revenue premium achieved by issuing government stock at a rate of interest above market rate? Is this not simply taking revenue this year which has to be paid back in the form of higher interest in future years? If this is not window-dressing, what is?

Examining the projected revenue for 2007, two figures stand out showing step change increases which deserve further explanation. Revenue from gaming taxes is planned to increase from Lm12.5 million this year to Lm18.5 million next year. Domestic economic growth, better tourist traffic and expenditure shifts due to new initiatives, may explain part of this increase but they cannot be expected to explain the full 48 per cent increase. If this relates to additional gaming taxes from international gaming operations that have been attracted to base themselves here, then it is a positive development and we should make the most of it before EU regulation will deprive us of this advantage just as the US has recently done to online non-US based gaming companies.

Harder to explain however is the growth of nearly 30 per cent in excise duty revenue on petroleum from Lm29.7 million in 2006 to a planned Lm38.3 million in 2007. It is hard to explain only in the context of various assertions made that the budget is not increasing any taxes or making new ones. How can one increase excise revenue by over Lm9 million without raising taxes? By magic it is a half-truth which is more insulting than a pack of lies.

Enemalta always made huge margins in its petroleum division with which it used to cross-subsidise its electricity division in order to keep utility rates socially responsible. With petroleum importation and distribution now on the verge of being privatised, the government has taken the right precaution to increase the excise duty in order to remove the excess profits. This explains the projected steep increase in such revenue in the Budget for 2007. So far so good!

But to keep things neutral one would have expected the government to pass back this excess revenue to Enemalta in order to keep subsidising the utility rates. There is nothing in the budget which suggests this is happening, which in a nutshell means that the government is withdrawing the normal subsidy to utility services in order to increase its ordinary revenue. Clearly, the government has every right to take such fiscal measure but this does not equate with the claim of no new taxes. Withdrawal of subsidies is taxation by another name.

Another case is the absence of provision for the government contribution to the Freeport for Lm6 million to pay interest on its international bond. Suddenly next year there is no such provision. It is hard to believe that the Freeport will finance its own interest when it has privatised all its operations and has no strong revenue flows. Probably another case of window-dressing where this interest payment is being funded outside the budget next year in order to look better than we really are.

Half-truths with bad intent?