Reflections on Budget 2009 (1) - Eco-taxation

I am very sceptical on the way we are dealing with the environmental problems. And the present budget does nothing but increase my scepticism.

But let’s clear some jargon out of the way. The present Government is known of its Newspeak. This has been going on for some years. Some of the words in Newspeak that immediately come to mind are the following:

Adjustment – meaning an increase if it is a tariff or a decrease if it is a benefit
Negative growth – a decrease
Tariff – stealth taxation
Administrative charge – another form of stealth taxation

One of the latest additions has been the word contribution. Thus one does not find the word eco-taxation mentioned in Government publications but eco-contribution. Ask anyone and you will be surprised that for them the word contribution has the connotation of being voluntary. Ask them if they are paying this ‘contribution’ voluntarily and you will understand if this is a contribution or a tax.

Is eco-taxation good? Some would say that since it is based on the polluter pays principle, it should be good. But what are the economic effects and is there an alternative?

One economic effect is that it increases the cost of those products that pollute. It therefore does discourage consumers from purchasing that product. But this is intrinsically negative. Consumers do not buy that product because it becomes more expensive and not because it pollutes. Thus the effect of such a tax re. environment is only temporary. Once the new price becomes affordable, then consumption will resume at the previous level. This is what happened when the Government introduced eco-taxation on plastic bags, some two years ago.

There is, however, another effect. Eco-taxation increases government revenue. Thus under the pretext of being environment friendly, the government would be able to increase its revenue without bother of explaining the need for such revenue. Thus the government would be able to increase its revenue without any hindrance. Everybody knows that one of our main economic problems is unbridled government spending – something which surely increase given this lack of transparency and thus lack of accountability.

Increase in prices would not only have the above effects but it will increase inflation. During these last few years, except for the first six months of last year, there wasn’t any management of inflation. Thus inflation has been one of our main economic problems – a problem which also contributes to our lack of competitiveness. Another effect has been the downward trend in our standard of living as our wage increases are not even equating the increase in inflation.

But on the other hand, is there a way out as surely we cannot continue to tolerate the deterioration of our environment. One way out, is reducing taxation on products which are eco-friendly. This could have easily been applied in the case of light bulbs. The present budget is increasing the price of incandescent bulbs - the older type of bulbs. This will contribute to inflation.

But what if the energy saving bulbs had a decrease in taxation? The effect on consumers will be that they are encouraged to use this type of bulbs as their becoming relatively cheaper than the old type, thus those using these energy saving bulbs will be rewarded. Moreover there is no effect on inflation and government revenue and thus its expenditure is curbed.

But this is only a partial solution. A complete solution would require the following:

• Educating everyone especially adults. I believe that our children are more environmentally sensitive. But even here we must be more creative. People must be shown practical ways of how to save energy while keeping their standard of living. It is useless to expect people to be willing to live in the dark ages.

• Standards. These are a requirement. Higher standards, especially in the area of energy savings equipment, are supported by everyone. This must not be a temporary effort but a continuous one as it will also increase our productivity and competitiveness.

A new Consumer Affairs Council

A new Consumer Affairs Council has been recently appointed. The only two persons who had kept their place on the Council are Mr Adrian Muscat Inglott and Mr Anthony Camilleri. The latter is the representative of the business community on the Council. Mr Muscat Inglott, on the other hand, is known for his commitment to consumer affairs and I always held Mr Muscat Inglott in high esteem. In the past, Mr Muscat Inglott and I had worked on several campaigns. Once convinced of an issue in favour of consumers Mr Muscat Inglott will persist until the goals set are reached. I hope that the present Consumer Affairs Council will have a successful term of office to benefit consumers.

I hope that this new Council will be more focused than the previous one. One of the main functions of this Council is to be a watchdog on the Consumer and Competition Division. For one reason or another, the previous Council had found great difficulty in securing the necessary information to ensure that the Division is operating efficiently.

Anther problem was the lack of resources to monitor even the most important developments which were taking place in this area both locally and internationally especially within the EU. In fact, the Consumer Affairs Council was conspicuous by its absence. The only event which had been kept alive, and also could be considered as a success, was the annual conference which dealt with a topic which either was effecting Maltese society or was a new development being implemented for the first time on the Island.

For a time, given the lack of research in the area of consumer affairs, the Council also tried to get itself involved in researching certain issues. However, in spite of the several attempts, it failed, again, because of lack of resources. This is an important function as policy, one of the functions of the Consumer Affairs Council, needs to be founded on research.

One difficulty that has arisen is the tension that was created between the Consumer Affairs Council and the Consumers’ Association. This happened because some within the Council played in the hands of others who had the intention of trying to control the Association. I sincerely hope that the Consumer Affairs Council will go out of its way to help the only consumers’ association we have, rather than create problems.
One last point. I hope that the Consumers and Competition Division does not look at the Council as a competitor but rather as a source of inspiration. This was the main source of all problems. The Division has a phobia for looking at others working in same field as competitors. This was again the source why the relations between the Division and the Association were never close in recent years. With regards to the Council, this attitude restricted the well-functioning of the Council as the latter did not have an independent source of funds but always depended on the Division. This in fact inverted the relationship that was supposed to be between the Division and the Council. As I said in the beginning, the Council is supposed to be the watchdog of the Division. But the dependence of funds made the Council dependent on the Division for its functioning.

I sincerely hope that the above problems are solved to ensure that the Council functions to the benefit of the local consumer and not just remain a useless structure.

Sistema bazwija

Nirreferi ghall-artiklu ‘Tbazwira kontra l-ligi ghad-dawl u l-ilma’. Fost affarijiet ohra ssemiet l-Awtorita’ ta’ Malta dwar ir-Rizorsi.

Issemma li jidher li l-Gvern irid li din l-Awtorita’ sservi ta’ ‘rubber stamp’. Jekk inharsu ftit lejn il-ligi li kienet ghaddiet tista’ toqghod cert li l-Awtorita’ m’ghandhiex il-porter li tieqaf lill-Gvern.

Jekk wiehed jara l-ligi ta’ din l-Awtorita’ jsib li l-Ministru, meta jrid, jista’ jnehhi l-Membri tal-Awtorita’ “ jekk, fil-fehma tal-Ministru, dak il-membru ma jkunx idoneu biex ikompli f’dik il-kariga jew ikun sar inkapaci milli jwettaq sew dmirijietu bhala membru”. Ifisser li l-Ministru m’ghandux bzonn ikollu l-ebda raguni hlief li tinbidillu l-fehma.

Barra minhekk jekk wiehed ihares lejn l-artikli l-ohra jsib li ‘L-Ezekuttiv Principali u l-kapijiet tad-Direttorat ghandhom jinhatru mill-Awtorità wara konsultazzjoni mal-Ministru’.

Fuq kollox meta l-Ministru ‘jidhrulu li jolqtu l-interess pubbliku, minn zmien ghal zmien jaghti lill-Awtorità direttivi bil-miktub ta’ xorta generali’. Dan ifisser li l-Ministru jista’ jindahal fuq kull haga, jekk jidhirlu li din tolqot l-interess pubbliku.

Biss jidher li l-Ministru mhux kuntent li ghandu l-poter li jpoggi n-nies tieghu biex imexxu l-Awtorita’, jigi ‘kkonsultat’ f’min jiehu l-karigi ezekuttivi, u jaghti d-direttivi fuq dak li jidhirlu. Jidher li minkejja li l-Awtorita’ ghandha l-poter u l-obbligu li tirregola l-istrutturi tal-prezzijiet u tistabbilixxi l-mekkanizmi li bihom jigi stabbilit il-prezz, il-Ministru hass li hu ‘l fuq mil-ligi u ddecieda hu.

Nitkellmu car, minkejja dan kollu, ma jfissirx li n-nies li qed imexxu l-Awtorita’ gew skolpiti mir-responsabbilta’ li ghabbiet fuqhom il-ligi. Li gara dan kollu u ma jitniffsux, jidher kemm l-Awtoritajiet li ghandna huma minghajr sinsla.

Biss fuq il-kwestjoni tad-dawl u l-ilma hemm entitajiet ohra mdahhlin. Per ezempju, ghaliex id-Dipartiment tal-Kompetizzjoni Gusta ma nvestigax ir-rati l-godda. Id-Direttur ta’ dan id-Dipartiment ghandu dritt li jinvestiga u jiddeciedi fuq ir-rati, peress li l-Enemalta hi monopolju. Jew anki dan qieghed hemm biex jipprotegi l-interess tal-Gvern, meta suppost li qieghed biex jiddefendi l-interessi tal-konsumaturi!

U x’inhu jaghmel l-Awditur Generali, entita’ ohra li qed inhallsu ghaliha ahna l-konsumaturi, biex jara li dawn qed jahdmu tajjeb u b’hekk ikun qed jassigura li t-taxxi li qed jigu mhallsa mill-konsumaturi qed jigu minfuqa sew. Personalment inhoss li l-Awditur Generali ghandu bzonn sew aktar poteri u sew aktar hegga.

Biss fuq kollox, x’qed jaghmel il-Parlament? Ghaliex hallejna li l-Enemalta minghajr kontijiet awditjarji. Din mhix entita’ zghira!. Qed jintefqu l-miljuni kuljum u qiesu ma gara xejn. Ghaliex sew il-Ministri li tahthom jaqghu dawn l-istrutturi mhux qed jigu ppressati jispjegaw dawn in-nuqqasijiet u l-indhil taghhom. Ghaliex il-Parlament mhux qed jezamina dawn l-entitajiet u jagixxi fuq dak li jsib. Jew, bhal ma kien qalilna Ministru, anki l-Parlament sar ‘rubber stamp’ tal-Gvern?

Fl-ahharnett x’qed taghmel l-Istampa biex nohorgu dan kollu fil-pubbliku? Niehu r-ruh meta nara artiklu, bhal ‘Tbazwira kontra l-ligi ghad-dawl u l-ilma’ li qed jinvestiga dawn l-affarijiet.

Hu minhabba dan kollu li, mhux awtoritajiet bla sinsla biss ghandna, izda sistema ta’ ‘checks and balances’ bazwija li qed tnawwar id-demokrazija. U povru konsumatur li jkollu jhallas ghal dan kollu.

Published Torca 23rd November 2008

Maximum or Minimum?

I’m referring to maximum or minimum harmonization of EU directives. Why should consumers be interested in such a subject?

Let’s see what we’re talking about. Maximum harmonisation of EU acquis occurs when no Member state can go above the requirements or benefits given in the Directive. Minimum harmonisation occurs when the Directive stipulates the minimum requirements or benefits. In this case the Member State can provide tougher requirements or give greater benefits.

Up till now the main approach has been minimum harmonisation as this makes it easier for the Member States to reach agreement. On the other hand, this approach has provided the main setback to the Single Market. The reason is that it has led to market segmentation where business exploits the situation to extract higher profits by charging higher prices.

A case in point is the price difference (after the exclusion of any form of taxation) that one finds regarding cars. The EU continuously monitors the price dispersion of cars. Though the dispersion varies from time to time, there is still price dispersion which means that the Single Market (same price, excluding taxation, throughout the EU27) is not working properly, at least, regarding cars.

The matter is more complicated when we come to consumer rights as these are not that obvious as prices. Many consumers tend to shy away from buying across borders as they are not sure that the level of consumer protection in the other country is the same or better than their own. One example is the level of protection offered to consumers re bank deposits.

How many consumers knew that before the recent financial crisis locally based banks registered in the Netherlands, apart from better interest rates, offered better protection as the Dutch Deposit Guarantee Scheme was much better than that offered by locally registered banks? Since October this has changed as the Dutch Government is offering protection for up to the first €100,000 (the present level is applicable for a period of one year) whereas the Malta Government is guaranteeing the same level but for an indefinite period since no time period was mentioned in Malta. The good thing about this is that this is not a pre-election promise and thus stands a better chance of being implemented if the need arise. I’m saying this as, up to the present, the Government has not taken any specific legal measure to ensure this.

The above is only one example of the various levels of consumer protection one finds in the EU countries. Thus it would be a step forward to go for Maximum harmonisation where the level of protection would be the same everywhere within the Single market.

But why are so many consumer organisations against the introduction of such a principle in consumer protection? The reason is simple. The way Maximum harmonisation is being implemented is not one which takes the best condition one can find in the Member countries and then implementing it. The measures which are being included are the result of what is agreed at the Council of Ministers. Thus it is the outcome of the political process where extensive haggling takes place.

The result is that the Maximum harmonisation many a time is pegged at a level which is below that which has already been achieved in countries where consumer organisations are strong. That is why the main opposition for the implementation of this principle comes from the Nordic countries.

Mind you, this is a generalisation. In Malta we were latecomers in the introduction of consumer protection. However, we used this to our benefit as, when we finally came down to introducing the necessary legislation, we used the experience gained in other countries to introduce measures which were many a time above the minimum required by EU law. We also used the experience of countries outside the EU which have the best consumer protection – Canada, Australia and New Zealand. Consequently, we should be interested in this issue as, if the present trend continues, we would be one of the countries to lose some of the present consumer rights.

But is there a way out? Yes, I believe that the way is that indicated above. I believe that we should go for Maximum harmonisation but at the initial stages we should take the best one find in all the EU27 member states. In that way, consumer protection in Europe would experience a quantum leap while on the other hand we would be experiencing the converging to the Single Market. All depends on how much consumers and their organisations are aware and are ready to take a stand on this issue. Finally, it all depends on whether the respective governments of the EU27 Member States will succumb to the pressures of business or else for once stand up for consumers.

IR’s biggest problem

It’s the lack of fairness mostly due to politics. Fairness itself is a tough problem. It becomes even problematic once it is based on political discrimination.

Some might say that thus it should not be a problem as there is legislation against political discrimination. This assumes that reality changes according to legislation. If it were so, then gender, religious and political discrimination are a thing of the past. But anyone knows that such things still exist and it is very difficult, and at times practically impossible, to prove discrimination.

Recently, a friend of mine changes jobs. He left a job with career prospects to a new job which suited him better. The new employer, a large corporation, seemed quite interested as it was ready to pay the penalty he had to pay on leaving his initial job. He got the job but one month before his probationary period was over he received a letter informing him that his job will be terminated once the probationary period is over. Not a nice situation especially for a person who is married and has two young children!

What can he do? Practically nothing as the law gives the right to the employer (and the employee) to terminate the employment at will without assigning any reason. And the problem of fairness springs out facing us.

What’s the way out? Can we safeguard that at least the employee is given a fair chance to prove himself during the probationary period? What can unions do about it?

Changing legislation would be difficult as most probably any change would mean that the probationary period, as we know it today, will be finished. Employers would surely argue that it is fair for them to have such a period as it enables them to shove the unsuitable easily, without much hassle.

But unions can make the situation much fairer. Unions are not there to decide who is suitable for employment but have the duty to see that all are given a fair chance. Through collective bargaining unions can safeguard this. One method that unions use is that the employee is given the notice that the employee would not be engaged a month before the termination of the probationary period. This is the clause that one finds in the collective agreement of the corporation where my friend was engaged.

But I feel that this is not enough. In fact if one looks at some collective agreements one would find a fairer way. The employee receives a report on his performance at least twice before the end of the probationary period. The employer should have the duty to pinpoint any shortcomings on the part of the employee and set standards of performance. Thus the employee will have a right to mend his ways. I’m sure that this would benefit both the employee and the employer.

However, all this would fail if the context is within the public sector as many a time the basis of such decision is political. In such instances the above would fail as the employer will always find something new about which he is not satisfied. As I had said, proving political discrimination is very difficult to prove even though it is very obvious to feel it. As far as I can remember I can recall only two instances where political discrimination was proved. In one of the cases it was very obvious as the employee involved was discharged on the basis of inefficiency in an area where it was obvious to all that he excelled above all other competitors.

The other instance the political angle was proved, by chance, years later after the employee was discharged. It was the result of our big mouthed Minister going on television and stating that such discharge was correct as the person involved was engaged in a sensitive position and thus his political activity was contrary to the interests of the government. This was the time when this person, then occupying another position, was pushing forward the idea that the engagement of top posts within the civil service should go to blue eyed boys.


This shows the sorry state we live. I’m saying this for two reasons. First, through such action we’re really showing that we do not believe in democracy where every citizen has the right of association and the right to his/her political belief. Second, and up to a certain extent more serious, is the fact that we are so short of professional people that we simply cannot go on and use only half of the human resources available because of politics.

A historical Moment – unions join forces

It’s a historical moment. Yesterday’s announcement that the local unions are joining forces to protest against two major issues was a breakthrough. It was the first time that they are joining forces at the national level. There were many attempts in the past but for one reason or another they all failed. Some failed at the initial stages while others failed just before the final agreement.

The two issues which acted as a catalyst were the lack of consultation and the government’s mockery of social dialogue and the new water and electricity rates. The first issue is a long term issue. This has been a characteristic of the Gonzi Government. Under Premier Fenech Adami contacts with the unions were constant through Minister John Dalli.

But under Lawrence Gonzi things deteriorated especially at the MCESD level. Some time after Dr Gonzi took office he addressed the MCESD partners and one of the things that he emphasised was that he was going to give great importance to the MCESD. Not only that but he promised that he was going to be involved personally.

This did not materialise. There has never been such a lack of consultation with the unions as under this administration. This applies not only to the GWU which has been completely excluded from all consultations but it applies to all unions including the UHM. In fact UHM’s Secretary has long been complaining of lack of consultations.

In fact I’m confused when I hear the unions call themselves Social Partners because this term can only be used when there is a framework of Social Dialogue. It takes two to tango. If such a framework is non-existent or not functioning it is foolish to continue to consider yourself a Partner. Partners have rights and responsibilities. At present they are burdened with the responsibilities but they are not enjoying their rights.

It is a historic moment for the unions as all sides proved to be flexible. The GWU took the initiative but it was ready to share the limelight even though it had already gained support from other unions. I think that Vanessa McDonald was on target when she wrote:
But when the Union Haddiema Maghqudin suggested a joint protest, the GWU immediately leapt at the chance to stand shoulder to shoulder - and to make history.

I sincerely hope that the experience sharing responsibility and glory of organising this protest will be the basis of further cooperation. My experience always showed that on the shop floor in most cases there already exists cooperation between the unions. Let’s hope that such cooperation will now be the norm at the national level.

Big Government getting Bigger

Eurostat has recently issued the publication Government Finance Statistics – Summary tables 2/2008. The Malta Government expenditure sheet shows some interesting figures.

1 Government revenue is getting bigger by the year. Compared to 1996 Government revenue more than doubled. In fact it increased by 106%. What does this mean to the economy? Consumers have their purchasing power reduced by such amount and the whole economy is deprived of that amount of resources.

2 Taxation has increased by 161% - again more than doubled. Since 1969 direct taxation had increased by 225% - more than tripled. Indirect taxation had increased by 120% - more than doubled. Weren’t we promised long time ago that income tax was to be reduced. At one time, one political party had the elimination of Income Tax as its battle-cry in one of the general election!

3 The total Government expenditure as a percentage of the GDP stayed practically the same = 42.6% in 1996 and 42.4% in 2007. Weren’t we promised a smaller government? What happened? Can anyone inform us why this happened? Or are consumers considered as dumb?

Everyone knows that since 1996, the services which were provided by Government decreased and not increased. Thus why are we spending so much more when we’re receiving less?

What is the Auditor General doing to see that our taxes are spent efficiently?

The Auditor General has an important function in a democracy. Is it standing up to its responsibility? Taxpayers demand an answer.

Three industrial actions

Last week there were reported three industrial actions - two by UHM and the other by MUT. The common factor was that the employer is the Government.

This is a common trend that most industrial actions are usually taken within the Public Service. There are two reasons - first is that the sector with the highest unionisation is the public sector and the second is that within the public sector, things, especially industrial, are not dealt with at the bud.

Usually, things are left to deteriorate. If an employee has got some grieniance, this is not dealt there and then, but left pending. Many times, the employee has no alternative but to turn to his union. Even here things stall as any clarification sought by the union regarding this grieviance is usually left unanswered for several months. And the only way out for the union is - industrial action.

Is it not possible for the public service to put its act together and deal with the complaints at the intial stages?