 13 - 19 December 2000 |
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Chamber of Commerce welcomes budgetary measures, holds certain reservations
While the Chamber of Commerce welcomed the Budget on a general basis, the Chamber as a whole and some of its sub-sections have found certain gripes. Following is a brief overview of the Chamber’s budgetary reactions. In general, the Chamber considered the measures announced as positive and conducive towards further containment of the gap in public finances and a further strengthening of Malta's main economic indicators. However, the Chamber contends that the private sector must be assisted in creating the level of national wealth required not merely for the attainment of public finance targets but also for considerations of employment, investment, balance of payments and standard of living. The Chamber welcomed the government’s acknowledgement of the private sector’s role as the creator of wealth in the economy. To this end, it is pleased to observe the announced intentions to improve the business environment for private firms particularly SMEs. The new Business Promotion Act and the Small Business Efficiency Unit are specifically mentioned in the Budget Speech as are mentioned the government’s aims to reduce bureaucracy for the business community. In the Chamber’s view, if the private sector is to create more wealth in the economy, it must therefore be allowed to operate with least obstacles and bureaucracy possible. It must be nurtured and helped to assist, in turn, the future economic prosperity of the country. The Chamber’s Healthcare Section makes reference to the fact that Minister Dalli pointed out that the 15% profit margin on imported medicinal products is not properly enforced in the Supplies and Services Act. In this regard, the Healthcare Trade Section believes that since a competitive bidding process is in place for the procurement of such products, Government should abolish such ceilings and allow operators to compete freely. The Importers Trade Section perceives the announced taxation of fringe benefits as the most concerning policy measure emerging from the Fiscal Budget for 2001. In this regard such a policy option is perceived to present a two-fold effect on the operators in the industry. On one hand, operators in this line of trade will be affected adversely as the loss of purchasing power suffered by citizens struck by such a measure will result in lesser demand for the goods and services offered by retailers. On the other hand, from an employer’s point of view, such a fiscal measure would also imply higher costs in the form of higher money-wages demanded by employees. The Information Technology Trade Section is concerned with the treatment of fringe benefits. In its view, the Section feels that these will considerably increase operating overheads in the industry, as such benefits are used throughout the IT industry as an incentive to retain employees with their respective companies. In taxing these incentives, their effectiveness against high employee turnover will definitely diminish. The Insurance Trade Section is concerned with the lack of clear guidelines regulating various exemptions on different insurance policies. As an example of such anomalies, one can mention the different treatment of medical and life insurance policies. Whilst medical insurance is exempt, life insurance policies are not. This can create potential problems in that these types of policies often form part of collective agreements. Such a lack of clear and defined guidelines is conducive to the creation of uncertainty and higher compliance costs. The Tourism Trade Section regards the introduction of VAT on air tickets sold by travel agents, is seen as discriminatory and regresses the industry to the anomalous situation created in 1997 by the Customs and Excise Tax. Such a measure is seen as discriminatory, as its application treats differently tickets issued by travel agents and those issued directly by airline outlets. Such a measure leaves two losing options for operators in the field. One is to pass on this tax to the consumer. However this may induce clients to buy their tickets directly from the airline at the loss of the agent. The other option would involve the direct absorption of the tax by the travel agents, which will impinge negatively on the profits of the company. The Sections contends that these distortions need to be rectified either by reverting to the pre-budget situation or else implementing such measures indiscriminately across the board. | |||||||
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