Levy removals on food staples to begin next month

By July 2003 levies on a wide spectrum of foodstuffs and staples will have dropped by 30 per cent. This reduction will be staggered and will occur in three stages. The first reduction of ten per cent will take place on 1 September 2002. The next ten per cent reduction will occur on 1 January 2003, while the third ten per cent reduction will take place on 1 July, 2003. The remaining 70 per cent of the levy will be removed on Malta’s accession to the EU.

The items to be affected by the reduction in levy include staples such as flour, cooking oil, pasta and beer. The distinguishing feature is that all these products fall under the classification of processed foods not associated with local agricultural produce.

Edwin Calleja, Federation of Industries Secretary General, said that his federation was still discussing certain issues with the government. "We have made several submissions with the government and are in the process of negotiating.

Processed foods can be divided into those which use products derived from primary agricultural sector of Malta or foods which use imported agricultural products.

"We are also talking to [Economic Services Minister] Josef Bonnici to try and ensure an equitable deal for the Maltese sector when it comes to removing levies and the impact that that inevitably brings with it. As far as derivatives are concerned, the government is negotiating with the EU about the removal of levies and assistance to the agricultural and processing sector. IPSE are studying the situation to ensure the survival of the small concerns."

When contacted the Chamber of Commerce remarked that it had "no reservations as to the dismantling of the levies mentioned in the first list. This is in line with the Chamber’s position on import levies, which has been consistent since this measure was introduced in the late eighties.

"The Local Manufacturers (Promotion) Act was introduced as a temporary measure on 28th July 1989 with a view to grant domestic producers the necessary protection until they invest, restructure and adjust to international standards and competition. The revenue earned by Government from this measure was meant to be ploughed back into the private sector by way of restructuring assistance.

"The Chamber believes that 13 years is adequate time for the effects of such efforts to materialise. The continued existence of levies is now exerting adverse effects on the economy not merely in terms of consumer price levels but also on the incentivisation of innovation, product upgrading, higher value added, increased competitiveness and export promotion. In this sense therefore, such protection is contradictory to Government’s aims as spelt out in the Industrial Policy and the Business Promotion Act as it is conducive to complacency and to an inward-looking approach by local producers."

With specific regard to levies removal and the EU, the Chamber recommends "that rather than over extended transition periods for the removal of levies, Malta should focus on the achievement of more EU financial assistance to adequately support the identified agricultural sectors in need of restructuring. This may involve broader participation in any related programmes that would assist local producers to upgrade agricultural processes such as methods irrigation and produce. The relevance of a successful rural development plan for Malta cannot be over-estimated in this regard."

The Chamber augurs that "the consultation process on such a sensitive issue continues on an on-going basis in an effort to ascertain that full benefit is reaped from developments in trade liberalisation and that the latter does not take place to the detriment of any sector within the local economy."