The immediate excise duty of EUR9 per tonne on imported cement is a “bolt out of the blue”, and has come as “a terrible shock” for all stakeholders involved in the construction industry, Vince Farrugia, the director general of the Chamber which represents Small and Medium Enterprises (SMEs) in Malta, told The Malta Business Weekly.
Following the announcement made by Finance Minister, Tonio Fenech, when presenting next year’s budget earlier this week, to increase the excise duty on cement with immediate effect, Mr Farrugia said that whereas in other countries governments are coming up with schemes and incentives to boost development, the construction industry in Malta is being severely hindered by such ill-timed increases. “This will indirectly lead to increases in property prices, at a time when the construction industry, which finds itself in a grave situation, has yet to fully recover from the economic recession.”
Mr Farrugia described the decision “as illogical and will increase property prices by as much as eight to 10 per cent”, adding that roughly “12 per cent of the country’s workforce is employed in one way or another in construction, which is only three per cent less than the amount of people employed in the tourism industry. Something needs to be done and fast to remedy the current dismal situation regarding construction in Malta”.
However, Michael Falzon, the president of the Malta Developers’ Association, offered a different view to the increase, despite commenting “that it is only the government who stands to gain by the increase”.
Mr Falzon said that based on his calculations the EUR9 cost on cement is actually minimal, when compared to the annual turnover of the industry.
The cost, which he calculated based on the total cement imports of the previous year, amounts to around EUR3m per annum, he said. Although it is an increased cost that nobody would have liked, it is marginal when compared to what the construction industry makes in a year.
The reasoning offered in the budget is the polluter pays principle, but while an environmental impact is undeniable, Mr Falzon said that this, in his opinion, is a good pretext for something which would be better described as a revenue raising exercise.
He added that according to statistics, Malta imports around 300,000 tonnes of cement annually.
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