10 – 18 January 2001

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MTA contribution increases, untimely for leisure industry

By David Lindsay

While some business owners have seen only minor increases to their MTA contributions, contributions now payable by others have become tremendous and have come about at a rather inopportune moment – during the low season.

Many operators in the leisure and hospitality sector are now realising what the increases actually consist of. They are analysing last year's accounts while preparing how to face the worst months for business this year. In fact, one hospitality business owner complained that his annual contribution toward the running of the MTA soared from some Lm80 per year to Lm750.

Another bone of contention stands with penalty payments. Prior to the new contributions recently announced, contributors would pay a normal bank rate if the payment was not effected within three months.

Now, however, if payment is not effected within the stipulated time frame, defaulters are penalised by seeing their contributions doubled – a practice that the MTA describes as giving a ‘discount' of 50 per cent for timely payments. Effectively, if the business owner mentioned above were to fail to meet payment deadline, that Lm750 fee would in reality rise to Lm1,500

When The Business Times spoke to the GRTU's Leisure and Hospitality President Phillip Fenech, he explained, "Our members reacted strongly against the new policies laid out by the MTA. Not that they feel that the industry doesn't need advertising abroad at a point in time when they are re-positioning their products to be in line with developments in the tourist operator markets – such as the reduction of at least 40,000 tourists per annum from Frosch.

"Running contrary to the incentives received by the manufacturing industry, for example, if one looks at the tourism sector, no one incentifies it.

"The tourism and leisure industry over the last few years has passed through a rather difficult period over the last years as a result of rising standards, fierce competition, increased number of outlets, heightened supply and shifts in the economy.

"The type of tourist lately has been of a lower yield while figures are failing to keep up with supply. This, unfortunately, goes part and parcel with sluggish domestic demand.

"We all know that the economy is in a stop and go state – making it difficult to plan a business and to see a turn-over high enough to be able to determine profitability.

'As a result, any extra expense is undesirable - especially at the moment, when the market is slumping.

"The sector has become a very expensive one to operate in, businesses are becoming more and more breathless and sustainability is decreasing rapidly. Compliance has become a very expensive exercise."

Asked how he responds to criticisms that this is just another case of businesses airing their grief, Mr Fenech explains, "If anyone is in doubt, go ask distributors of wines and spirits and ask how their debtors lists stand. It is painfully obvious that they are not keeping up with their payments. Additionally, ask the banks where loan and overdraft payments from the sector stand. Even many of last year's trading licences still need to be paid. These payments are not being kept up with because owners are living in luxury, it's a mere matter of survival.

"The majority of businesses in the sector are owner-managed, we've all had to put in more hours due to streamlining. Management is no longer about running the business, but also about fronting their businesses - with managers and owners working behind bars and serving clients now more than ever.

"We are all making our sacrifices to keep our shops open until matters improve.

"Is it wise to carry on burdening the sector at a time when it is suffering, or should we handle it with care until it becomes sustainable again and business starts ticking again as it should?

"Businesses in successful countries have grown because the economic policies for small and medium sized enterprises is geared toward low tax and high incentive. In Malta, we seem to be doing things the other way around – by auguring success only with lip service."

The Business Times, Network House, Vjal ir-Rihan San Gwann SGN 07
Tel: (356) 382741-3, 382745-6 | Fax: (356) 385075 | e-mail: editorial@networkpublications.com.mt