Yesterday, during a political meeting in Gozo, Opposition and Nationalist Party Leader Bernard Grech declared that the Nationalist Party will lower income taxes to 25% and company taxes to 15%. The upper band of the income tax bracket, that starts at €60,000 is calculated at 35%. Company tax on the other hand is at 35%.
These measures will be undoubtedly welcomed by the business community, and I welcome them too, but the Nationalist Party has no economic plan to address the government’s growing debt burden. This should be important for PN’s economic policy given that they have made the government’s growing debt as their main economic policy criticism of the government.
The Labour government does not intend to decrease taxes and is actually collecting more taxes due to both economic growth and increased efficiency by the tax departments. The Finance Minister, Clyde Caruana is also trying to trim down excesses in government expenditure although he is faced with the resistance of his cabinet colleagues and the Prime Minister himself.
While the Labour government is clearly abusing public funds to fund corrupt practices, the Nationalist Party is promising many things about the economy without a proper and well-thought plan. they also have proposals which are exact replicas of the current government’s initiatives. One of PN’s proposals is to introduce a fund which will off-set the price increases of many products. This initiative was already introduced by the Labour government and my criticism about it was that it may actually help increase inflation even further in the long-term.
Reducing taxes should come with a concrete plan for increased economic growth. The Labour government under Joseph Muscat actually succeeded in doing this, although the economic growth also came with an unrollable construction boom that left many negative impacts on the quality of life and housing affordability. Is PN planning to do the same?
Both Labour and PN are failing to think about the economy on a long-term basis and none of them have any strategic solutions. They only think of the economy in ways that can boost their political popularity in the short-term: reducing taxes and giving subsidies. Then people wonder why the government debt keeps increasing.
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