The Tribune

By FAY SIMMONS

Tribune Business Reporter

jsimmons@tribunemedia.net

A Cabinet minister has reiterated that tax increases are “off the table” while voicing confidence that the Government’s 50 percent debt-to-target will be met by 2031 through economic growth.

Michael Halkitis, minister of economic affairs, said that despite suggestions by the International Monetary Fund (IMF) following its recent Article IV visit that this goal will be “out of reach” unless “further revenue measures” are enacted - including a potential VAT rate rise and income tax for high earners - the Government has no plans to adopt such recommendations.

Pointing out that such reforms have been consistently voiced by the IMF on an annual basis, Mr Halkitis countered by pointing to upcoming investment projects that will drive economic growth as well as the Government’s plans to refinance existing debt, grow the economy and further improve tax enforcement and compliance.

He said the administration is going to “push” to meet its fiscal targets and reaffirmed that a VAT increase is “off the table”. Mr Halkitis added: “We believe that we will make it. Our economy is growing. We have a lot of investment in the pipeline.

“Our renewable energy programme, our electricity reform, will save us some money. This sort of transaction [the $300m debt-to-nature refinancing] will save us. We’re looking at some other opportunities to refinance high-cost debt that will save us some money.

“What we have to do is balance. You have to balance. They say you can’t do it unless you raise the taxes, but if you raise the taxes that will have an impact on your people. And so we’re going to try as hard as we can to make it with our strategy of growing the economy, collecting, controlling expenditure and finding new sources,” he continued.

“Tax increase is off the table, quite frankly. And so we expect them to say it again next year, and we’ll say the same thing again. Hit up next year, it’s off the table. We’re going to push for it. Before the pandemic, we were at 58 percent (debt-to-GDP) and so, you know, it’s not new territory for us, so we’re going to push for it. I believe we’ll make it.”

Mr Halkitis said the Government is not “contemplating” a VAT increase as it will have an adverse effect on residents. Instead, it is looking for new revenue streams such as the funds collected from the new 15 percent domestic minimum top up tax (DMTT) on corporate profit income.

“These are not things that we’re contemplating. We believe that if we continue to grow the economy, if we continue to do a better job of collecting taxes that are due, and if we continue to find savings, find new sources of revenue,” said Mr Halkitis.

“We recently passed the 15 percent global tax on multinational entities. We just passed it in the Parliament, and so in coming years we expect to get some revenue from that. That’s a new source of revenue. So we think that we can manage without putting more taxes on the people. So nothing more than a suggestion and they think that, you know, they always tend to go by the textbook. But of course, we have to do what’s in the best interest of us.”

The IMF report also suggested that beneficial ownership information on all companies that are awarded government contracts should be published to increase fiscal transparency. The report also suggested audited financial statements and procurement information for public corporations should be made public.

Mr Halkitis, however, said that beneficial ownership information is being published on the procurement portal but greater efforts must be made to ensure it is published in a timely manner. “That is being done,” he added. “If you were to go on the procurement portal.. those things are published. We have to make sure that it’s done, always very timely, and that everybody does it. But that is being done.”