Sunday, 4 March 2012

Answer given, questions raised.

The Malta Independent on Sunday -- Click to view in full size.How many times have you heard the PN spokespersons demanding Dr Joseph Muscat to state how he is going to finance the promised cuts in utility rates, when and if Labour is elected to government?

Now I can assure you that the PN's questions are not motivated by a genuine desire to know how it can be done.  They know better than anyone that it can be done if one makes it one's priority.

Their motivations are to place a banana skin under Dr Muscat's feet hoping that any explanation he may be prompted to give will show that one particular sector will be squeezed to finance such additonal expenditure and therefore offering a possibility for the PN to scare away votes Labour may have gained in that particular sector.

But if one really and genuinely wants to know how such utility rates reductions can be financed, the answer can be found in the main article on the front page of today's  The Malta Independent on Sunday titled:

How Malta could save €577 million a year: stamp out all tax evasion

The PN have been in government for 25 years and whilst the initial Fenech Adami administrations made good progress in addressing tax evasion by reducing the marginal rate of personal taxation from 65% to 35% and by introducing VAT which helped to build a better audit trail of commercial activities, the Gonzi administration has stagnated on this front.   Indeed one can say that it regressed as it took measures which weakened the VAT's audit trail.  

So if one wants to know how utility rates can be reduced without an increase in tax rates and without introducing new taxes the simple answer is to enforce existent tax laws to bring evaders to book.    This must be a comprehensive exercise including stiffening of penalties and reduction of marginal tax rates so that the taxes on income, whether earned or unearned, whether current or capital gains, will unified under one low rate.  

But on the same subject questions should now be raised on the Gonzi government and the Minister of Finance in  particular.

'Energy tariffs to remain unchanged' is the title of an article in today's Sunday Times by Minister Tonio Fenech.

So the question which the PN had long been asking Joseph Muscat rightly boomerangs back on Minister Fenech.   With oil price in the US$120 region, with Enemalta bleeding losses right, left and centre,  with government announcing it is taking on its books Euro 25 million expenses to relieve Enemalta commercial losses, and with Government having to reduce expenditure by Euro 40 million by order of the EU, how will the increased cost in energy procurement be financed?

This is a question for the here and now and not a hypotetical question for when and if Labiour is in government when no one knows what the energy procurement costs would then be.

The electorate had faced a similar situation pre-2008 elections.   The answer they discovered was that post-election the utility rates, which were kept steady pre-election as the oil price was reaching record levels,  were allowed to shoot up through the roof.  History repeating itself?  What's new under the sun?

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