Issue link: https://maltatoday.uberflip.com/i/205575
10 Business Budget analysis maltatoday, TUESDAY, 5 NOVEMBER 2013 We mean business Government's intervention to participate in the films coproduction market may genuinely be seen as something good. Pictured: still from Troy (2004), filmed in Malta who would normally visit Malta for a brief while so as to sell their products and promptly return back home… thereby taking money from the pockets of Maltese families while never paying tax locally. Businesses have to wait for another budget to enjoy lower water and electricity bills. This is sure to be a disappointment for the hotels, manufacturers and those in the retail industry, who are anxiously waiting to apply lower costs. The stability of diesel price for Q1-2014 is only a mild measure. Certain family-friendly measures such as subsidies for solar water heaters for the families, will surely mean that certain economic activities of those involved in such markets will be welcome. The one-liner of the Minister of Finance to introduce an employability index is welcome to the employers. At least someone will be thinking ahead of which skills are needed in the future. The MHRA (pictured: MHRA President Tony Zahra) will surely welcome the additional 4% budget for the Malta Tourism Authority. But yet again, the government has not taken on their proposal for a lower VAT rate for Tourism Services Additionally, the government will give employers incentives to take on apprentices for work placements. This, together with other measures for tax deductions for staff training, is surely something that should add value in a competitive global market. A particular paragraph in the Budget speech is entitled 'Giving space to the private sector'. This is seen as when the government issues expressions of interest for mega projects such as cruise line terminal, casinos, land reclamation and the shipbuilding area. Once such projects do start to be implemented, the multiplier effect and opportunities for sub-contracting will be notable. However, the local and international firms have shown that they do believe in Malta and invest in it, as can be seen by the number of applicants for each project. Is this something that was expected or was some effort required to make it happen? Surely being an EU member state is a good starting point. PHOTOGRAPHY BY RAY ATTARD THE tag line used by the business forum of the Labour Party prior to election is the best tag line to explain this year's Budget speech. Looking from the angle of the commercial sector, one notes a strong commitment from the government to allow the private sector to be the leader for a stronger economy. With an expected growth of 1.2% for 2014, the government is being more conservative than what other international bodies estimated. This one hand is a good sign, but for business people, this is a let down, as it does not show confidence on our capabilities. Though government is improving the budget deficit, its spending bill is higher. Does this mean that the government's share of economy is higher than that of the private sector? The government will certainly be seeking out more loans, thus wiping out any excess liquidity which our families save for. The government is certainly committing nearly half a billion in capital works. Part of it will be payment for past projects. Others are new projects. It is these that interest the private sector. It is these new projects that increase the work opportunities of business enterprises. For self-employed persons working at a smaller scale, an interesting initiative is the one presented for the part-time self employed, who are now also being allowed to employ another couple of persons. Incentivising more adults – especially females – to enter into the working persons' market is an added incentive for locating more skilful workers. The commercial sector will certainly look at the merging of the VAT and Tax Department as something that might hurt them. However, this bitter pill had been masked by certain pardons on the way VAT arrears are allocated. Additionally, the government has promised that it wants the selfemployed to be working… rather than being thrown into jail for failing to pay their VAT on time. This would be quite a relief. As an example of tackling tax evasion, the construction industry has been targeted. One particularly interesting measure is an online portal for the reporting of unfair competition. This is possibly aimed at these foreigners; mostly Sicilians As in past budgets, bureaucracy is mentioned. Yet no tangible examples of how this will be reduced is given. The private sector expects more commitment and tangible proof that this "can do" becomes a "will do" attitude. The government will continue on the previous government's plan for specialised parks – such as that of the Life Sciences and the Creative Digital Hub. This will be in direct competition to certain office projects that are coming on stream via the private sector. The MHRA will surely welcome the additional 4% budget for the Malta Tourism Authority. But yet again, the government has not taken on their proposal for a lower VAT rate for Tourism Services. The Minister of Finance pledged to continue to press forward the financial services and gaming sectors, as well as to offer more money as venture capital and other voucher programmes on which not much information was given. It will be debated on what government's intentions are to issue a white paper on opening hours for shops. Certain private sector participants may ask the government to keep a 'hands off ' attitude to control such a sensitive issue. One aspect that the private sector will appreciate is the government intervention to look into the review of bank charges. With the introduction of SEPA for eurozone countries, this was expected as we are members of a single market. Why should local industries pay more for bank transactions than their competitors in other countries? The government will honour its commitment with 74 families to re-locate the market in Valletta. This is part of the action plan to regenerate Valletta. Another measure is the 'Free Toll' for traffic entering Valletta extended to Friday afternoon and all the weekend. Government's plan to arrange the traffic flow on main roads will surely be welcomed by salesmen and delivery men. But those transporting locally goods to the ports will not enjoy the limitation on the move- ment of their vehicles. For the Gozo business community, the government has promised a study on an extended airstrip for Gozo (expect the environmental lobby to find fault with this). Additionally, a budget of €37 million for the Gozo Ministry is surely a massive sum for the sister island. The business community still feel a bit hurt in the way the ECO Contribution was introduced. Anything sold has a package on which there is a tax. Yet again, another study on this tax will be undertaken. The specialised sectors – such as Agriculture and Fisheries – have been mentioned, as always. Again, these sectors will enjoy incentives. But the details on how much will be given later. It is not uncommon that the private sector asks consumers to present their ID cards for transacting and contracting. This coming year, new ID cards are expected to be in circulation. One measure that the private sector will want more details on is the '3 Pillars Private pension Scheme'. Employers will be on the look out to see if workers and unions will be pressing for this in their future collective bargaining. Government's intervention to participate in the films co-production market may genuinely be seen as something good. However, one would have to see whether this investment will replace past benefits relating to fiscal credits and payback of VAT. Finally, the government is promoting itself as an open government. Certain interventions in the Economy have to be termed as giving direction to the economy. Basically, the incentives for a wider pool of workers seeking jobs may increase competition in wages which lower cost of sales. Investments in government projects are always welcome, more time needs to pass for the multiplier effect to be made evident. In the meantime, the incentives to allow consumers more purchasing power is the one that will generate economic growth in Malta. On balance, a positive budget for businesses with no great surprises for them.