Spreading the wealth - James Debono

Zminijietna – Harga April - Gunju 2009


To lend credibility to its commitment to safeguard free universal access to public services, the Maltese left must rehabilitate “taxation” from its current status of a political dirty word to an instrument to restore social justice and social cohesion.

In its two decades in the political wilderness the Malta Labour Party has been very ambivalent in its fiscal policy to the extent that one of its main electoral planks in 2003 was a tax holiday for a month for everyone, the mega rich included. In 2008, the party defied its leftist roots again by taking a leaf from French President Nicolas Sarkozy and promising to abolish tax on overtime.  Although this measure favoured a section of the working class, if implemented it risked depriving the state of a substantial amount of funds. It also risked encouraging workers to work more and sacrifice more of their free time.  The proposal also ignored large sections of salaried professionals who are not even paid for extra hours of work.

The Labour Party has still to outline a credible fiscal policy despite the current economic crisis. The party also failed to address head on the challenges of mounting health costs and inequalities, and was completely absent in the debate on the future of the pension system. Instead of proposing alternatives to neo-liberal solutions like means testing and increased reliance on private pensions and insurances, the party stood motionless frozen in a time warp.

For to ensure adequate and sustainable pension and health care in the future, the left has to consider the institution of separate and public health and pension funds, administrated by a professional management and scrutinised by the social partners. For its part the PN’s tax cuts have benefited mostly the upper middle class and higher income groups. Although the PN has not dismantled public services, it cannot address mounting health and social inequalities by expanding these services because of a chronic lack of funds. The solution is clearly not to economise on existing services but to increase the size of the cake derived from taxation.

Except for a pre-electoral proposal to decrease taxation for higher income groups, AD has fielded the most progressive proposals on taxation especially by proposing taxes on property hoarding and windfall taxation on banks and gaming companies. Although green  taxation is not meant to generate revenue, it could be an effective way through which the state can intervene to discourage land speculation and waste of resources.

Income tax remains the fairest way to redistribute wealth and in the current crisis one of the solutions progressive governments should consider is to increase taxation for the highest income group.  In the UK Gordon Brown has already embarked on this path. Taxing the windfall profits made by financial institutions could also contribute to the national coffers and also to shift taxation from productive employment to speculative activities.
Through the hypothecation of taxes the state can for example increase the tax on petrol to finance an improvement of the public transport system without putting the burden on commuters. Ultimately the greatest challenge is to clamp down on tax evasion.  This is vital to ensure the sustainability of public services. Ultimately the left faces a deeply ingrained anti tax populism.  This can only be combated through a new sense of civic patriotism based on social solidarity and pride in public services. 

Mr.Debono is a renowned journalist in the Maltese islands

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