Government now has credibility on tax collection, Finance Minister tells parliament

Government has changed the culture to the better on tax collection, Finance Minister Clyde Caruana told parliament on Wednesday evening.

“Tax collection was something no one wanted to speak about. The culture has changed on how we look at tax collection as a country,” Caruana said during his Budget estimates speech.

During his speech, Caruana spoke of how government’s credibility in a number of sectors related to the country’s finances, are the basis of its economic success.

On tax collection the minister said the time when people do not pay tax “is over.” “People in the country realised the government prioritises tax collection, and does so seriously.”

He said improved tax collection has helped government in its financial assistance when mayor global events like the COVID-19 pandemic and the Ukraine war, struck.

“This was possible through the moral authority and credibility government enjoys on tax collection,” he said.

Debt and deficit

Addressing criticism by the Opposition, he said debt is “not necessarily a bad thing”, and one has to compare it to economic growth.

“Without it [debt], we would have not been able to help people through subsidies. Those who stopped helping their citizens and businesses first, are the ones facing the biggest headaches in lowering their debt,” he said.

The minister said the country needs government to absorb major shocks as a result of global economic events, and so withdrawing assistance too early would result in an economic crisis.

“Two years ago, debt was 2.2% of the GDP, and now its stands are around 0.7%. This is a fiscal policy which works,” he told the House.

On the European Commission’s excessive deficit procedure, the minister said government’s credibility on the sector, as well as its plan to reduce deficit, mean it did not need to phase out energy subsidies.

He said government will be working well within the parameters set out by the commission, and will be doing so without putting the burden on citizens.

Speaking briefly on the national airline, he said it has been freed from political interference, and only the Labour administration had the courage to address the prolonged problem that was AirMalta now KM Airlines.

“Never has a government taken such an important decision before an election,” he said. “I always believed the difficult decisions should be taken, or else you are just prolonging problems.”

The way forward

Speaking on the way forward, the minister said government has to remain prudent and intelligent, as those are the principles on which credibility is built.

“The government is credible when it comes to riding out turbulent times,” he said. “I want to leave the country’s economy in a stable situation.”

Government must retain its credibility, he concluded.