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Public/private sector
discrimination
The decision to increase the expense allowance for public
officers serving in Scales 1 to 4 has been heavily criticised
by the business community and the constituted bodies who, rightly
so, feel that such an increase was not only given at a bad time
but also contradicts the government’s promise to cut down
on public expenditure.
Replying to questions sent by The Malta Business Weekly, the
Office of the Prime Minister said that such decisions, “that
is decisions concerning minor adjustments to allowances, are
approved by the Prime Minister and are not normally submitted
for Cabinet approval”. We are not doubting that it is the
Prime Minister’s prerogative to take such decisions, however,
we have serious doubts that the decision is fair, considering
the state of the Maltese economy.
Over the past few months, the government has stated very clearly
that it wants to cut down on public expenditure and The Malta
Business Weekly has repeatedly supported the government on this.
But one can never justify giving such an increase especially
at a time when employees in the private sector have seen their
salaries suffering further tax cuts because of the new taxation
on fringe benefits. This taxation on fringe benefits has not
only hurt employees but it has put more pressure on employers
and companies to increase salaries to make good for the tax
cuts. With the country’s economy as it is, the private
sector is not in a position to increase wages. Yet, the Prime
Minister has seen nothing wrong in increasing the expense allowance
for public officers, even though it cannot afford to do so.
The government is supposed to set an example. If cutting public
expenditure is high on its agenda, the government or rather
the Prime Minister should never have taken such a decision that
will only increase its high level of debt.
The Office of the Prime Minister said the decision was taken
to revise the expense allowance which was introduced in 1991
and to partially redress the inadequate compensation package
of the top management of the public service. This allowance
has remained unchanged over the past 10 years.
“As a result, the value of this allowance has eroded considerably
over the years,” the OPM said, adding it was therefore
felt opportune to revise the allowance and re-establish the
relation between this allowance and the salary pertaining to
each scale. This may be the case, but in the eyes of the public
and the business community in general the PM’s decision
was simply taken to counter the effects of the taxation on fringe
benefits.
In a statement last week, the FOI said the fact that such a
move came so close to the battles with unions over pay increases
was “nothing more than a subtle way by the government to
compensate its top public officials for the additional taxation
which has eroded their remuneration package after the budget
taxed their fringe benefits”.
The FOI criticised the fact that many public service officials
have received salary increases in addition to expense account
adjustments. It said: “In the coming months, the trade
unions will be negotiating with government for further increases
in wages and salaries that will apply to the whole public sector
in the coming three years. The country cannot afford any extravagances
at the present moment.”
However, the OPM denies that the government compensated its
employees to make good for the tax on fringe benefits.
“As a matter of fact, this allowance and other fringe benefits
forming part of the compensation package of public officers
are subject to 35 per cent tax.”
We beg to differ.
If the expense allowance had not been revised since 1991 why
take such a decision now, if not to counter the effect of the
new tax? How can the government say it wants to cut down public
expenditure but then gives considerable increases to public
officials? How can the business community have faith in the
administration when the government favours increases for its
employees and yet continues to heavily tax the private sector?
The public sector is being treated like a pampered child. If
employees want wage increases the government does just that.
Its employees enjoy half-days in summer. Efficiency and accountability
are two words that mean nothing to public sector employees.
However, the private sector must pay more in taxes to fund the
public service. Companies have to survive in an environment
that is not conducive to growth. As companies face more cash
flow problems, government continues to spend, spend and spend.
This is the reality in Malta. Two weights, two measures. Let
the private sector sweat it out, while government employees
enjoy their ‘hard-earned’ increases and knock off
work at 1.30pm. Add more taxes so that a bloated public sector
can continue to thrive. On 1 May, the Prime Minister called
on the Maltese people to stop grumbling. When people see government
employees enjoying the fruit of such ill-timed decisions, you
can’t blame them.
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