16 February 2005

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GRTU has advised its members not to pay VAT penalties
By Julian Manduca

GRTU’s Secretary General Vince Farrugia told The Malta Financial and Business Times that its members were advised against paying VAT penalties, and told to lodge an appeal.
Asked by this newspaper whether the GRTU had received any complaints about the recently announced government concessions on VAT penalties from businesses that regularly paid their VAT and fines, Farrugia said “no” and surmised: “this is probably because our members have always acted on our advice against paying the penalties. We always told them to pay the VAT due, but to appeal against the penalties.”
Vince Farrugia added that the way the penalties are being worked out and the inflexibility of bureaucrats is a gross injustice and the penalties are excessive.
“It is very unfair on businesses that regularly fill in their forms and pay VAT on time to be fined when, because of some problem, a VAT return arrives one day late. The authorities should understand the problems of enterprise,” Farrugia said.
The GRTU has always claimed the penalties being charged for late or non arrival, or incorrect, submission of VAT returns are unjust, and is hoping that government’s waiver announced Monday will lead to changes.
On its part Government has not indicated any willingness to change, finance parliamentary secretary Tonio Fenech confirmed to this newspaper that changes to the penalties were not on the cards.
Asked whether he that those that paid VAT and penalties whenever they fell due could feel cheated because of the concessions, Fenech said that besides VAT and penalties there was also interest to pay, so those that were to be given concessions would still pay higher amounts than those that always paid their VAT and any penalties due on time.
“With the interest rate at 1 per cent per month for not paying VAT there is little incentive not to pay. It is cheaper to borrow from the bank and pay the VAT due rather than waiting for a concession scheme as the one we introduced,” Fenech said.
The parliamentary secretary reminded this newspaper that this was not the first time concessions have been granted in similar schemes for VAT defaulters, and confirmed that the measures announced Monday are not intended to be repeated. “We are faced with a situation where some people’s penalties were so high that the likelihood was they would rather declare bankruptcy than pay penalties. We had to decide on a cut off date to bring in the money owed.”
Asked whether the government was contemplating any changes to the values of penalties for VAT defaulters, Fenech said the government was not considering any changes and that the penalties were in place to deter businesses from lagging behind in their VAT payments.
The GRTU’s Vince Farrugia did welcome the concessions being offered to businesses saying these would assist the cash flows of both government and private businesses.
Asked by this newspaper whether the concessions were unfair on those that regularly paid their VAT and the fines to date, Farrugia said that what was being proposed by government was “crude justice, but always the case when these kinds of measures are announced.”
Vince Farrugia told this newspaper that the attitude towards businesses in Malta had to change: “People and government should change their attitude towards businessmen and stop thinking of them as criminals. As is the trend abroad a fine or penalty as a result of business dealings should not be considered criminal unless it involves fraud, or something equally serious. “Misdemeanours including late submissions of returns and the like should be treated civilly, and business not brought before a criminal court.”
The concessions explained on Monday were already announced in the budget speech and will benefit thousands who have failed to pay VAT penalties. 4,200 people who have submitted their VAT returns but not paid the fines and 2,400 who have not submitted their returns or paid their fines stand to be let off the hook to the tune of Lm5.1 million.

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