6 - 12 January 2000

Timing of levies removal questioned

by Anna Maria Bartolo

Although the levy removal process in itself would be beneficial to the economy the timing might not be ideal, the director general of the General Trade and Retailers Union (GRTU) Vince Farrugia said yesterday.

Mr Farrugia's reactions were sought following this month's removal of levies over four main product categories: soaps and detergents, hosiery, certain types of footwear and paper products.

Mr Farrugia told The Malta Business Weekly that the removal of levies in itself was beneficial to Malta because competitive structures would be enhanced and new opportunities created. However, one had to ask whether Malta was ready for the new economic opportunities offered by levy removal, he said.

"Unfortunately, the levy removal process is happening at a time when unemployment is increasing and there is no push for new economic incentives due to the budget deficit," he remarked.

"The 1993-1994 period would have been a better time to start reducing the protection of products since 1994 saw the culmination of a phenomenal rate of economic growth," he said.

Once levies were removed, competition would no longer be controlled, he said. Before, it was possible to gauge competition but now the industry will have to find a way to cut prices, he continued.

Mr Farrugia said the GRTU was carrying out a survey to measure the impact of levy removal on the importer and the product. However, he added, results would not be at hand until the end of the quarter.

The association criticised the Institute for the Protection of Small Enterprises for not having offered help to small businesses sooner. The GRTU wanted IPSE to be more militant in their approach, he said.

He remarked that IPSE was geared too much on the manufacturing industry which has not doing been doing too well and is cutting down on its labour force.

"IPSE is not measuring the decline and closure of industry on the rest of the community," he said.

The levy was not an asset to Malta because it created a situation where fixed prices were pre-established by the tax rate imposed on products, the director general said.

Furthermore, there had been no alternative programme to help the SMEs while levies were still enforced, he said, adding that levies had created an extraordinary system which some businesses were not able to handle.

"The levy created a dislevel playing field for different traders and definitely opened the doors to competition," Mr Farrugia said.

Opposition industry spokesman John Attard Montalto also expressed the Malta Labour Party's views on the levy removal process.

"The MLP never stated that levies on industrial products had to be retained forever," Dr Attard Montalto told The Malta Business Weekly.

He said the Labour Party's policy was to distinguish between levies in different types of products.

Whereas products relating to industry had to be removed within an extended timeframe, those related to agriculture were to be retained. Agro products were to be evaluated on a case-by-case basis, he said,

He explained that the MLP's policy was to remove all levies within a period of seven years roughly equivalent to the year 2005. This extended period was introduced to give as much space as possible to local industry so as to be able to compete with imported products without levy attached to them, he continued.

"Local industry requires a great deal of help so as to compete on the open market. It was precisely because of this that the Labour government had set up the IPSE," the opposition spokesman said.

In fact IPSE was one of the first initiatives taken up by the Labour government and was innovative in the sense that IPSE was a joint effort between the government and the constituted bodies, he remarked.

"The idea behind this innovation was that all parties involved would share the responsibilities as well as dictate the policy regarding the restructuring of the SMEs," Dr Attard Montalto said.

The MLP had realised that substantial frames were required for the restructuring process, he remarked, adding that for this reason, 20 per cent of the privatisation of Maltacom was to be allocated to restructuring.

Labour had also negotiated an agreement with the European Union whereby the unspent EU funds would be directed towards the restructuring of local industry, Dr Attard Montalto said.