Maltatoday, 9 November 2008, by James Debono



After discovering the electoral value of green issues back in March, the government has now tapped into its fiscal value. JAMES DEBONO sifts through the budget measures that are really eco-friendly, and those that are just money-spinners. Killing the Plastic Bag

The €0.15 levy on every plastic bag could generate as much as €6 million for the government’s coffers if the Maltese continue using their 40 million plastic bags a year.
But Finance Minister Tonio Fenech has made it clear “the government does not want the 15 cents. It only wants to stop the use of plastic bags which harm our health.”
The same noble intention was used to justify the eco contribution back in 2005. On that occasion George Pullicino vowed to “kill the use of plastic bags before they kill us.”
For a time people reacted by using canvas bags, but as time passed the plastic bag was back with a vengeance. A visit to any supermarket in Malta confirms that people are back to their old habits, packing their shopping in plastic bags given for free at the counter.
In a bid to close any possible loophole, the government has decreed that shop-owners will have to account for plastic bags in their fiscal receipt, thus bringing an end to the era of free plastic bag giveaways.
The government has also introduced a 15c tax on every plastic bag irrespective of its size. This closes the loophole exposed by MaltaToday in April 2005 when it revealed that importers had flooded the market with non-biodegradable plastic bags 1cm smaller than the size that was liable for taxation.
Since consumers have the option of using a canvas bag instead of a plastic bag, they have a way out of the new tax. Whether 15c is enough of a disincentive for those affluent enough to afford the cost of convenience, is another matter.
Surely the most effective way of eliminating the plastic bag without enriching the government is to make plastic bags illegal. But taking such a drastic step would be illegal under the same EU regime which forced Malta to lift its ban on the importation of soft drinks in plastic bottles. Taxing swimming pools

An owner of an average domestic swimming pool containing 70 cubic metres of freshwater will have to fork out an extra €116 in annual license fees.
Possessing a swimming pool in a country where the sea is less than half an hour away from any destination and where water is scarce or too expensive to produce has surely always been a wasteful practice.
But since those who are rich enough to possess a swimming pool are likely to afford the tax increase it is extremely unlikely that the new measure will stop anyone from developing a new swimming pool.
Significantly, it was MEPA which in the past decade has allowed the construction of swimming pools located next to ODZ farmhouses.
Yet the increase in fees could at least penalise those who fill their swimming pool with groundwater extracted “free of charge” from boreholes.
Most domestic swimming pools are either being filled by water bought from bowsers or illegally extracted from boreholes belonging to the pool owners themselves. It is highly unlikely that anyone fills his pool with tap water.
Therefore the increase in swimming pool licenses will put a cost on the fresh water which many swimming pool owners are getting either for free or at a low cost.
Surprisingly, those using seawater to fill their swimming pools will also have to pay an extra €42 in license fees. Since the use of seawater does not impinge on groundwater sources, this increase cannot be justified on environmental grounds.
Using sea water is not even an option for most users because swimming pools which are more than 100 metres from the shoreline can only be filled with freshwater.
While the measure helps in giving a socialist twist to the budget, the increase in license fees is too low to have any real impact on the demand for swimming pools.
But by taxing a category which can surely afford to pay, the government will see its revenue increase by at least around half a million euros.
Hotels will suffer the greatest brunt of the license hike on swimming pools, as they will see their license fees rise from €3.49 to €6 per cubic metre of water. This means that the owner of a 120-cubic metre hotel pool will pay an extra €301.
The only long-term measure to combat groundwater extraction is to force borehole users to install a meter which would measure their groundwater extraction. While farmers could be charged a nominal fee, those extracting groundwater to fill swimming pools or to water their lawns could well be expected to pay the same rate as those using tap water.
This is the only long-term solution to the water problem.Energy conservation
One of the few revenue neutral measures is the requirement of an energy performance certificate for any new project or building.
The ones who will pay for this measure will be the property developers who will most likely pass the cost to the property buyer.
This measure is long overdue and is being taken because Malta is in breach of the EU directive on energy conservation in buildings.
In order to meet Malta’s EU requirements, the government introduced stringent conditions on new building permits in November 2006 by setting limits on the space occupied by windows, and obliging every new building to have a well or a water cistern.
But for the past two years
no official body was enforcing these regulations and
architects were expected to exercise “self-regulation” when submitting designs to MEPA.
The lull between the introduction of the energy conservation regulations and clear rules on enforcement has practically exempted thousands of new development applications unleashed by the extension of building boundaries and the revised local plans from energy conservation rules.
Still, owners of older buildings will benefit from a €300 grant to insulate roofs and to install double-glazed windows. The promised lamps

The government will be imposing a levy of 25c on non energy-saving bulbs, while giving each family a voucher to buy five energy-saving lamps for free from shops of their choice.
In this case the government is using both the carrot and the stick to encourage families to use energy-saving methods.
In the short term the government will spend €4 million to deliver the energy-saving lamps while earning only €600,000 from the tax on wasteful bulbs and tubes.
Yet in the absence of permanent tax incentives for energy-saving lamps, despite the 25c tax normal bulbs will still remain substantially cheaper than energy saving lamps.
The same carrot and stick approach will be used in funding alternative energy schemes through a levy of 5.5c on every litre of petrol and 2c on every litre of diesel.
In return the government will also spend €2 million to subsidise two-thirds of the cost of installing a solar heater which currently costs between €400 and €2,350. The measure is capped at €460.
The measure will only benefit a maximum of 4,500 families. As soon as the funds run out the government will not be giving any more subsidies. Yet this will represent a sharp increase from the 1,564 applications for subsidies on solar heaters presented in 2006.
Since the costs for installing a solar heater are not astronomical, the subsidy will make this investment more affordable for middle-class families.
But a time when many of these families are barely making ends meet, it is doubtful as to how many will be trying to jump the queue to make it among the first 4,500 applicants.
Through another scheme the government intends to subsidise 50% of the cost of installing the substantially more expensive photovoltaic installation, which is beyond the reach of most Maltese families.
Currently photovoltaic installations cost between €8,000 and €15,000 depending on their energy capacity. Since the subsidy is capped at €3,000 the 50% subsidy will only apply for the smaller installation.
But once again as soon as the €500,000 run out nobody will be able to benefit from the scheme. Considering that only 200 families will be able to benefit from the environmental benefits of this measure, it is a drop in the ocean.
Still the number of potential applicants for solar heaters and photovoltaic will be limited by the relaxation of building heights which took place in the past few years. Many people are discovering that they are not able to install solar water heaters because they have no access to the roof of their apartment block on which a penthouse has been developed. Others have their access to the sun blocked by high-rise development next door.
Yet the €2.5 million in subsidies for households using renewable energy is dwarfed by the massive increase in energy bills, which will enable the government to fill Enemalta’s €55 million hole.
The most significant subsidy is being directed at industry, where 16,000 enterprises will be eligible for tax credits, costing the exchequer €10 million if they install photovoltaic panels on their roofs.
Yet the government is not allocating any money for the Sikka l-Bajda wind farm, which will entirely rely on a private investment of €130 million. Since MEPA has not even started conducting its environmental impact assessment on the project, it is unlikely that any costs will be incurred by anyone in the next few years.
But it still a mystery how these private investors will recover the costs of this mega investment. Revenue generating regime

One clear case where environmentally friendly measures are masking the government’s fiscal intentions is the much awaited car registration tax overhaul. In this way the government will be raking €8 million more from the new tax regime which favours smaller and cleaner cars and which will see their tax drop by as much as 44%, while penalising big and polluting cars which will see their tax increase by 45%.
It is doubtful whether the new tax regime will encourage the rich to give up on their expensive SUVs. But probably, middle-class people will be more likely to opt for smaller and cleaner vehicles.