Updated | 'Government increasing taxes halfway through the year' - Fenech

It took a debate of over an hour for finance minister Edward Scicluna to decide that proposed amendments to the law should be withdrawn.

Parliament is currently at committee stage discussing amendments to the law to implement budgetary measures.

The first amendment to be proposed this evening was to increase the excise duty on cigarettes, a 5c increase that would have been absorbed by the distributors and not by the consumers, Scicluna argued.

When government increased excise duty, the increase “was meant to target high value cigarette packs” and not the low-value ones. However, distributors took the increase as a blanket measure and all the prices of all packets of cigarettes increased.

“The distributors managed to find a loophole with the end result that monies meant for the government were pocketed by the distributors,” Scicluna said. “The proposed increase would have not been transferred to the consumer.”

Disagreeing with the proposed amendment, shadow minister Tonio Fenech said this was not the way to address a loophole and insisted that the increase in excise duty would eventually be transferred to the consumers again.

The committee was suspended as Tonio Fenech discussed the matter with Scicluna’s consultants present in the Chamber.

Eventually, Scicluna addressed the committee to confirm that “the amendments will be withdrawn”.

“It appears that tax and legal experts believe a complication could arise and so I’ve decided to leave it as it is,” Scicluna said.

At this stage, Fenech welcomed Scicluna’s decision arguing that, if implemented, the government was proposing a 5c increase on cigarettes: “It would have been a mistake and I welcome the government’s decision to uphold the opposition’s request.”

But Scicluna’s quick rebuttal was “to deny” everything that Fenech had just said.

“There was no attempt to increase the price but simply to address a loophole… the attempt was too late. I believe that this loophole has been taken advantage of at the detriment of the government,” he said, adding that the matter would be addressed in the next budget.

Fenech replied by saying that he could not agree with what Scicluna said: “If you are raising the ceiling rate to €1.45, it means a 5c increase on every packet.”

As the finance minister insisted that the measure would have not affected the end prices of cigarettes, the former minister rebutted that it contradicted statements Scicluna made earlier – Scicluna had said that the government could only announce a change in excise duty but it cannot dictate the market price.

The same issue repeated itself when increase in excise duty was proposed to on certain categories of cement.

Fenech said the proposed amendment would give rise to the same problems – and the committee was once again suspended as Scicluna consulted the experts.

‘Increasing excise duty on cement’

Resuming, Scicluna said the government was increasing the excise duty on cement which did not carry the name ‘Portland’ but on cement that carried ‘Pozzolan’.

“Importers have found a loophole to evade tax and government cannot allow this. This government wants to fight tax evasion and that requires the introduction of this clause. We cannot remain dormant,” Scicluna said, adding that excise duty on all sorts of cement should be the same.

However, Fenech argued that the government was simply increasing taxes because importers of Pozzolan cement were doing so legitimately.

“You are treating efficient operators as if they were thieves… if the importers were doing something wrong, Customs would have never accepted the cement’s classification code. As a minister, you have all the right to increase taxes. But this only means that you are increasing taxes just four months after the budget.

“You are worse than us… because we used to increase it from one budget to another while you are increasing it halfway.”

Fenech went on to accuse Scicluna of being “highly unprofessional for the way a tax increase was being introduced”.

The excise duty on cement is to increase from 17c per 1000kg to 27c per 1000kg.

Scicluna however took umbrage at Fenech’s comments, insisting that he never called importers thieves. He said that, in due time, he would release proof showing that the PN administration had adopted such a system in the past.

“You are the first person to defend tax evasion. Because this clause defends the government’s income, monies which ultimately fund social benefits,” Scicluna told Fenech.

Scicluna insisted that the importers had found “a loophole” to evade tax and the government would not tolerate it.