Issue link: https://maltatoday.uberflip.com/i/1481619
8 NEWS 13.10.2022 Autumn heralds an end to "silly season" George Mangion George Mangion is a senior partner at PKF, an audit and consultancy firm, and has over 25 years' experience in accounting, taxation, financial and consultancy services. His efforts have made PKF instrumental in establishing many companies in Malta and established PKF as a leading professional financial service provider on the Island R eading the articles in the media during this "sil- ly season", one is regaled with pictures of congested roads and heavy traffic, which the roads minister blames on permits for street closures during festas. Such jovial manifestations portray images of happy pa- rishioners during such reli- gious/pagan celebrations of the patron saint giving a snapshot of the pseudo liberation of a young nation released from the strictures of the pandem- ic. Newspapers carry pictures of smiling women casually dressed in two-piece sum- mer dresses with bare midriffs sporting elaborate tattoos on their arms and legs. Men are equally trium- phant at the late morning fes- ta marches, some inebriated throw caution to the wind and sing pompously along "bandal- ori" in bedecked village streets. Quite a congenial throng of political personalities grace these indigenous religious manifestations but then it is all part of our southern Med culture. Many agree it is an ef- fective safety value living on an island with daily revelations of scams, scandals and towering cranes. Autumn and the first rains herald change. Minds turn to the delicate balancing act that our finance minister has to fight double digit inflation having amassed an extra two billion euro debt incurred dur- ing the past pandemic years. Let us discuss the "elephant in the room", ie the surging infla- tionary forces that are raiding our economy. e Times editor praises the government for do- ing the right thing in protecting families and businesses from the immediate impact of rising fuel, energy and food prices by subsidising imports of these es- sential materials. Very wisely, the editorial reminds plebs that one-off subsidies are not a sil- ver bullet. e text book solu- tion of throwing good money after bad can only last so long. What goes up must eventual- ly come down. Again, capping energy costs means wastage is encouraged and the rich are subsidized equally as the sans- culotte. It is true that the labour market points to full employ- ment but are we drilling down to eliminate cases of precariat with young families working three jobs just to survive till the next monthly cheque. e mad rush of third coun- try nationals scootering in con- gested streets to deliver snacks for a pittance is condemnable. e cost of dining-out has risen and many remark how families are paying double the vat on dining compared to the amount charged in Europe. Still Castille refuses to reduce tax. Using a band aid approach to camouflage fuel and grains inflation is the preferred and only tactic so far. e finance minister has un- derstandably instructed all ministries to start looking for savings on public expenditure. e man in the street who trav- elled for holidays this summer is conscious that petrol/diesel charged at the pump are dou- ble the rate we pay today. Last week, the MCESD were consulted on valid proposals for the 2023 budget. One hopes that the minister of finance will listen and recalibrate his fis- cal tactics to ensure taxpayers' money is used judiciously to spread the trickle-down effect of millions being harnessed by speculators in construction. Consider the scene of easy tax money collected by notaries registering a ballooning num- ber of property deals. Another fly in the ointment is the contractual obligations signed by state appointed di- rectors at AirMalta to disburse millions if and when sacking its 80 pilots (currently manning eight aircraft). Pray, be kind to us and spare us the usual rhet- oric on what needs to be done in the year ahead to balance the deficit, encourage economic growth and deal with the var- ious ecological challenges fac- ing the country. One can only hope the hunt for vat evaders will not be achieved at the cost of further tightening of bureaucracy on small and medium sized enter- prises. ey are the usual sus- pects when the screws of com- pliance are tightened. Perhaps banks also need to slack their stiff risk averse attitude. Other- wise, we must address environ- mental degradation, avoid the easy solution of reducing cost of production by importation of unskilled labour from low- cost countries. e mantra of saving 100,000 jobs via furlough schemes has been wired deep in ram of both One and TVM TV stations. Still nobody criticised such a meritorious splurge of tax pay- ers monies yet there results an enigma - the mystery shortage of skilled workers. Observe the recent fall in consumer senti- ment largely reflected in de- velopments in expectations of major purchases in the coming months, and to a smaller ex- tent, of their financial situation in the past year. A recent anal- ysis by Central Bank talks of an economy that is happily sailing away in choppy waters. It is steady as she goes. Could the enigma of an econ- omy happily firing on all cylin- ders, enjoying full employment (and a scarcity of workers and 8500 jobless as per Labour Force Survey) be solved if one examines the strength of a bur- geoning shadow economy? is activity which averages about 26% negatively affects economic growth in Malta and left unchecked, the under- ground economy (UE) would erode people's faith in the in- tegrity and fairness of the tax system, undermine the com- petitiveness of honest busi- nesses, as well as cause honest taxpayers to bear the load of those who gain from money laundering and indiscriminate issue of direct orders. Activities in the hidden sector include skimming, unreported construction-related activities, hidden rental income, and un- reported trade-related activity. Needless to observe how our shadow economy is more ac- tive than the ones of Greece or Italy. Readers ask how can a country which prides itself of having been recently lifted from the Greylist, still har- bours such a high percentage of shadow activities. Just contemplate on the exam- ple given by some members of cabinet resolute not to declare their tax returns. is speaks volumes of the lackadaisical at- titude of the transparency and governance regime reigning in Parliament. Moving on, the finance min- ister gallantly hopes to fill the coffers by fighting the under- ground economy and targeting vat dodgers. e truth is that in the 2023 budget, the govern- ment faces a Herculean task to collect arrears of income tax, vat or stamp duty because loopholes are wide. Let us face reality and nurture the popularity of the re-elected Labour party in power. It is em- boldened by an overwhelming majority gained in last election. Perhaps this massive and popular support will turn the tables in our favour oozing the largesse needed to embold- en the Illuminati in Castille to weave a credible budget.