MEP says governments should increase taxes when economy is booming

"It was governments' worst mistake when they failed to contain and tax the property boom. No country wanted to be the first to take such step. Their lack of action led to the global recession," Labour MEP Edward Scicluna said yesterday at a political activity he hosted on the eurozone crisis at the Phoenicia Hotel.

Scicluna also said that when undergoing recession, countries should increase their deficit. "This however cannot be applied today due to the public debts. Fiscal policy has lost its effect."

Scicluna said that while Prime Minister Lawrence Gonzi argues it is not the time to lower taxes, "in reality taxes are increased when the economy is doing well."

Answering to questions by MaltaToday journalist Karl Stagno-Navarra, Scicluna argued that capital projects should be economically viable. "In fact, the European Union would help fund capital projects if they are economically viable and in the long run prove to be commercially productive. But projects such as the City Gate are not economically viable, and in fact the EU did not fund the project," he said.

Scicluna voiced his criticism of the Special Purpose Vehicle, a company proposed by government for the financing of the City Gate project.

The SPV would be set up by the Valletta Regeneration Committee and listed on the Malta Stock Exchange. Finance Minister Tonio Fenech had already explained that the public would invest in the City Gate project through the SPV.

"A special purpose vehicle is usually used by companies to cover their debts," Scicluna said.

He went on to say that a government's competence is proved when it is able to show its people from where and why their taxes are being taken. "Currently, people cannot understand why they are paying all these taxes, or how their tax on various products and services is being calculated. Communication is the key: if government really explained, the people would understand. This is how you really show that you are transparent," he said.

Scicluna said a Labour government would be prudent: "We always were a prudent party. We are scared of debt and love discipline."

He added that Malta should stop spending money, especially on companies which do not create wealth.

On the euro crisis, the MEP admitted he didn't approve of the Common Consolidated Corporate Tax Base. "As a country, we do not have the same income as others. In certain areas, we will never reach the European average. In others we are not competitive enough ... even though we then catch up in other sectors."

He however agreed that the EU should approve a country's budget. "It is for the good of the country and its citizens to show that the budget is transparent and government is not throwing money away."

Scicluna added that unfortunately there are countries which were taking advantage of the crisis and increasing the taxes to take their people's money: "This is the red line which our country must resist".

Echoing the Prime Minister's comments, Scicluna said the eurozone doesn't need a treaty change. "If Germany and France accept, there are already existing measures and solutions to the current crisis. But Germany doesn't want to accept because it has a legislative mind."

According to Scicluna, Germany is not flexible and wants other countries to be like it.

He also dismissed concerns that the eurozone will collapse and fail: "Eurozone's responsibility is being placed on Germany. I'm sure it doesn't want to go down in history as having been the country responsible of the eurozone's collapse and the dissolution of the European Union."

Scicluna added that the eurozone is strong, and he would never accept to see it crumble because of "certain stubborn people, members of the eurozone". He said the solution to the crisis is the the European Central Bank, which could be a lender of last resort for sovereign states.

On his decision to contest the general elections, Scicluna said he believes the Labour Party can be a valid alternative for Malta. "There is no place for arrogance," Scicluna said. "It happened to the Labour Party in the past and it is now happening to the PN. Arrogance makes you take hastened decisions, which are irresponsible and insensitive and distance you from the people."