GRTU is extremely concerned that a new proposed Eco-Tax will hit directly the Small and Medium Enterprises. GRTU emphatically states that it is not in favour of a new tax. Existing tax systems are a heavy burden on small enterprises. In the past little, if any, thought was given to the impact on small business when most of the fiscal measures in action today where drafted. The sum total of all this is that small businesses in trading, wholesaling, distributive traders and retailers cannot take on any additional burden.
GRTU proposes that government looks elsewhere if it is in desperate need of additional revenue to cover the growing expenditure of environmental protection and development. Small businesses have no administrative capacity to handle complicated systems. Regulations hit regressively on the small business since the owner has no expertise or enough resources to handle separate items and procedures.
Time is also limited. As things stand, the onus of complying with VAT, PAYE, SSC, sick and parental leave, bonus, employment contracts, recurring charges, the new Data Protection regulation, and endless bureaucratic requirements is increasingly pressing on the productive potential of private initiative. This goes contrary to the spirit inherent in the European Charter for Small Businesses to which the government is an endorsee. It is for this prime reason that GRTU argues against the imposition of an Eco-Tax that will have to be managed by traders and that would add additional costs to a sector which is becoming increasingly un-competitive. GRTU definitely objects to any eco-tax requesting retailers to be the tax collectors.
GRTU believes that a restructuring and perhaps marginal additions to existing fiscal measures may achieve the desired result without the need of new taxation. It must be recalled that when VAT was raised from 15% to 18%, the constituted bodies were given the impression that the additonal 3% was to cover additional health and environmental costs. Furthermore, GRTU believes that a number of ‘eco-taxes’ already exist in Malta. The “eco-taxes” already in place include, among others: road taxes; fuel taxes; planning charges; tobacco excise; garbage charge to commercial units; and fees for dumping. Part of these revenue sources should be pooled in an Eco-Fund that makes good for environmental policies.
Such an Eco-Fund should be managed on the same lines as agreed at MCESD: that of a Special Committee which also includes the participation of the private sectors. If increased funds are subsequently required then any amendments should be discussed according to the terms of reference of the Committee. GRTU, in principle, is in favour of fiscal arrangements that earmark funds to a specific public account that is in turn used for environmental protection. GRTU also agrees with the Polluter Pays Principle, but disagrees that specific items should be singled out for damaging fiscal action. The end result usually is that consumers will have to pay higher prices on particular items with a negative expenditure impact on other purchases. It is not fair on the traders in these sectors. No eco advantage is obtained while consumers suffer the burden.
Tax payers cannot accept anymore that they have no control on the way government is spending tax revenues. Each time government has a short-fall the tax payers are made to pay more, with the burden falling primarily on the middle-income groups whose consumption patterns are always targeted for increased taxation. Thus government has to study carefully the impact of eco-taxes, particularly on competitiveness and distributional effects. For example, international studies suggest that taxes on petrol, which are considered as eco-taxes, have slightly regressive impacts but might affect middle-income people most. An inefficient regulation may lower the cost to some groups but at the cost of raising it more to others
Now that at EU level all efforts are being made to cause governments to measure the economic impact of measures prior to their introduction, GRTU would expect government to adhere to this norm. Why set-up Competitiveness Committees and establish competitiveness benchmarks if measures are taken in spite of economic impact. GRTU insists on the conduct of professional business impact assessments prior to the imposition of new fiscal initiatives. These are needed especially if policies affect the supply side of the economy. GRTU represents a substantial part of those who create the means by which the economy can expand. This is why government should take heed of what GRTU is proposing. It is the direct voice of private initiative and enterprise.
In this respect, GRTU is against new eco-taxes that have to be collected by the trader or retailer. If goods are taxed at the point of entry, then this move is prone to face strong opposition especially if it hinders the efficient functioning of the free market. GRTU has striven over the years to ensure that e-customs procedures are introduced in Malta and today GRTU is extremely vigilant to ensure that no restrictions are imposed on cargo traffic. GRTU believes that should the tax be imposed at the Port this would seriously affect the free movement of goods in which case GRTU would request the EU Commisssion to intervene. Government would be in grave error and in conflict with EU Rules if it were to impose the Eco Tax at the Port of entry. Chapter 10 of the Acquis indicates specifically which producers are subject to excise duty and the customs department keeps a register of all importers handling the excise products. Should government invent its own excise list it’ll throw the customs department back to the times when customs officers will, for one reason or another, impose on traders various forms of unacceptable demands that are now happily defunct. Malta would also be in conflict with EU Rules on free Competition if the Eco–Tax would be imposed on imports and not on exports as stated in Budget Speech 2004.
If on the other hand the Eco Tax is imposed on packaging of particular sectors of producers in Malta this would further complicate the life and viability of an economic sector which is currently striving to withstand the competition suffered following the removal of levies and removal of protectionism.
GRTU has consulted with its colleagues in Belgium where an Eco–Tax is imposed. Traders there all object due to the great negative impact it has had on business and the excessive burden caused to administer it. GRTU has also noted the EU Commission’s action against the German Government following the hasty introduction of a deposit scheme on certain products. The EU commission is arguing that the German scheme is infringing competition rules.
GRTU is monitoring efforts by other EU governments to introduce Eco–Taxes through its participation in the Eco-Committee of EuroCommerce. As representative of business interests in trade, wholesale and retail, EuroCommerce is objecting to the type of Eco-Tax which is being proposed in Malta as unworkable, or infringing on free trade and may cause unnecessary burden on traders. GRTU, through EuroCommerce, is advised to object to the introduction of the proposed Malta Eco-Tax.
Finally, GRTU notes that Eco-taxes exist in countries where fiscal structures have already been overhauled. Our fiscal structure was overhauled in 1995 after the introduction of VAT and in 2004 when levies were removed. However, other combinations of fees and minor taxes complicate and distort the system. It was emphasised that VAT would be the main tax and would replace the multitude of smaller taxes that have huge compliance costs. GRTU has steadfastly recommended that the fiscal authorities should design a taxation system that acts as an automatic stabiliser and is therefore sensitive to business cycles and consumption forces.
GRTU objects strongly to a system of hotch potch taxation. GRTU argues that the current economic climate in Malta shows that it is certainly not the time to continue impinging on the already dampened business platform. Malta is losing its competitive edge with the high aggregate tax revenues that feed unproductive spending. GRTU strongly urges government not to impose additional tax and bureaucratic burdens however much laudable the aim. Enterprise in Malta cannot take on additional stress.