Issue link: https://maltatoday.uberflip.com/i/1515420
maltatoday | SUNDAY • 4 FEBRUARY 2024 7 INTERVIEW The following are excerpts from the interview. The full interview can be found on maltatoday.com.mt as well as our Facebook and Spotify pages. A survey you carried out among members lists in- flation as their topmost concern. This week, a price stability agreement came into force between the government and major su- permarkets and importers to address that aspect of in- flation that has hit families hard. Yet you disagreed with this agreement. How do you reconcile this position with your members' concerns about inflation when this nine-month agreement will lead to lower and stable prices? Inflation is a big national problem and businesses and people are expecting government to do something about it. Businesses are 'citizens' as well and are impacted by the same things that affect people… every expense businesses make has become costlier because of inflation. But inflation is not just about food. Government is only addressing a small part of the food component with this agreement but there are 10 other components that determine how infla- tion is calculated such as housing and rents, clothes, entertainment and oth- er categories. Inflation is a big prob- lem because Malta imports most of its goods. We are not against government addressing inflation; on the contrary, we proposed several measures that will help tackle inflation… In comments, you released to the media, you said the Chamber is against govern- ment meddling in the free market. Why? In a free market that works well, and we have competition across the board… the government should only intervene when something is wrong with the market. When announcing the agree- ment last month, the government said it was not reacting to profiteering be- cause none was found. It said this was an idea proposed to supermarkets and importers to take on board as a form of corporate social responsibility but real- ly and truly what government did was introduce price-fixing. The website set up as part of this agreement contains products with recommended prices. In a healthy competitive market, you can find that product being sold for less or more because there are different busi- ness models. As a matter of principle, we cannot agree with government in- tervention in a healthy, free and com- petitive market. For almost two years now the government has intervened in the market with hefty subsidies to keep energy and fuel prices stable. This is costing the country €350 million and all families and businesses are benefitting without distinction. In this case, you did not argue against government inter- vention. On the contrary, you said it was important for businesses. I cannot under- stand why one intervention is wrong and the other not. In the food sector competition is strong. In the energy sector, there is only one electricity provider. We do not have multiple energy providers like other countries. Additionally, there is also only one source of fuel importation [for the power stations] and government intervened on that one source not to pass on the higher prices to the con- sumer. Government addressed that single source at importation stage… although we disagreed with the food price stability mechanism we never went up to government and rubbished it. We always showed willingness to cooperate but called for a framework that made sense... Despite the misgivings you have, scores of members have joined the stabili- ty scheme and from the original 200 outlets slated to participate in it, these in- creased to 400 by 1 February when it came into force. We know what happened. When gov- ernment managed to reach an agree- ment with some of the big operators, the others had no other choice. Com- petition is so fierce in this sector that the moment someone reduces prices competitors try to match them. So, the moment government said the scheme will be public with a website showing the products and their prices and list- ing the participating shops, they had no option but to join the scheme… we never told members not to participate but argued that the framework should make sense… we asked for a level play- ing between large businesses, which are also our members, and the smaller players in terms of visibility… Some of the mechanics are also wrong since the consumer will see the price of a product and expect it to be the same in all shops when this is not the case since it depends on whether the sup- plier is part of the scheme or not. There are certain things that could have been done better had we worked together. What are you expecting government to do to tackle inflation? A major proposal is a reduction in VAT from 18% to 15.5% on all goods and services. The calculation we made was that this reduction in VAT would still allow the government to collect as much revenue as it used to before in- flation started to peak. Given that VAT is a percentage-based tax, higher prod- uct prices meant that government was collecting more tax money. By cutting VAT, government would still collect the revenue it used to before inflation peaked and it would have a broader impact on lowering consumer prices. What guarantee is there that the VAT reduction would be passed on completely to the consumer and not siphoned off as retained profits by businesses? If we have a limited number of opera- tors, which we don't, I can see this sce- nario developing. There may be a few short-sighted operators that decide to do as you suggest but competition is so fierce that I am sure they will take the opportunity to pass on the savings to their clients. PHOTOS: JAMES BIANCHI / MALTA TODAY