Malta welcomes EU recovery plan but challenges distribution criteria and taxation plans

Finance Ministers got together online to discuss the EU’s proposed Recovery Plan, intended to kickstart the European economies after the challenges broughout about by the coronavirus pandemic.

During his intervention the Minister for Finance and Financial Services Edward Scicluna welcomed the idea of a Recovery Package as a needed instrument to kick start the economy of the EU Member States and assist those Member States who have been hit hard by the pandemic.

However he expressed a number of Malta’s concerns, including the main allocation criteria and nature of funding.

The ECOFIN meeting, held by videoconference, focused on the Commission’s proposal of a 750 billion euro plan, two-thirds of which would be distributed in the form of non-repayable cash grants.

Allocation criteria should not depend on employment

With regard to the allocation criteria, Malta insisted that there should be a forward-looking approach which considered the impact of Covid-19, rather than considering the pre-Covid economic situation. Scicluna said that criteria should not rely on unemployment rates as the only indicator. “Such an indicator is not sophisticated enough to catch the peculiarities of countries where there are some sectors which survive the ravishes of the pandemic while having one important economic sector, devastated – as is the case with tourism.”

The Maltese Government welcomed the provision of a modest volume of grants in the spirit of solidarity, however considers the ratio of grants to loans allocated to some countries as too high. The Minister insisted that the way the present grants to loans ratio is structured, it will turn a number of Member States, including Malta, from net beneficiaries to net contributors and having a multiplier effect which is difficult to understand let alone explain to others. 

In the Commission’s proposal, Malta would set to receive just under one billion euro, a third of which would come in the form of loans.

Malta has also raised the issue of taxation, suggesting to go for non-confrontational and controversial means of taxation, such as on non-recyclable plastics and similar products. The Minister argued that the proposal to extend the Emission Trading System into taxation of air and sea travel, not only impinges on the welfare of the Member States which rely heavily on tourism, but also believe that these taxes are the last to consider, in this unique situation and has been dealt a significant blow.