FOI, Economic Services Ministry at loggerheads over dismantling of levies

The Federation of Industry has said that it wanted to make its position with regards to its stand on the government’s programme for removing levies on agro-food very clear. An FOI official said that the "FOI firmly believes that industry’s possibility of restructuring painlessly will be compromised with the strategy that the government is adopting." According to the FOI, "while the government is making certain concessions towards the EU by starting to dismantle the levies as from this month, nothing is being gained by local industries from this. Things are being made worse by the fact that the EU has not yet granted tariff-free access to Maltese industries. Furthermore, European companies that export to Malta are given subsidies from the EU. This puts them at an unfair advantage when it comes to competing locally against domestic companies."

The FOI said it had received a false impression regarding the removal of levies for some products. "While at first it was said that levies on certain agro-foods would only be dismantled after accession, the pace with which it was now being suggested that they should be removed was unrealistic, given the time-frame in which enterprises could receive help and contributions towards restructuring. There is also a problem with the time allowed for local companies to enter the very tough and competitive EU market."

Referring to the legal notices which announced these measures, the spokesman said "that no allowance had been made for Malta’s insularity and elevated freight costs." The federation also pointed out that the ports needed to be better organised and managed to lower the costs of handling and transport.

On the other hand, an official of the Ministry for Economic Services refuted FOI’s criticisms, calling them an incomplete and incorrect analysis. "Although the specific levies where only published last month, the FOI had been informed about this plan since July 1999. So to speak of a short time frame is misleading. Regarding the concessions to the EU, it is important to remember that is only now that Malta is dismantling levies on things that have enjoyed duty free access into the EU since 1970, when Malta formed an Association Agreement. Besides that tariffs imposed on food products by the EU are much lower than those imposed by Malta."

"What the FOI has also failed to mention is that levies on agro-food will only be lowered by 30% over 16 months, with the rest to be removed after accession."

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 occur in three stages. The first reduction of ten per cent as already happened on the 1st of September 2002. The next ten per cent reduction will occur on the 1st of January 2003 and the third ten per cent reduction will happen on the 1st of July, 2003.

The remaining 70 per cent of the levy will be removed on Malta’s accession in the EU.

When contacted, an official of the Chamber of Commerce remarked that it had "no reservations as to the dismantling of the levies."

During a meeting, representatives of most producers said that the 30 per cent reduction in levies was something that they could absorb, since they were keen to restructure and increase their productivity."

Meanwhile a number of FOI members have asked the government to obtain duty free access for their agro-food products before EU membership. Their reasoning is that the faster that membership is achieved, the better it will be for Malta’s industries.