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Film Commission made ‘insignificant progress’ on NAO recommendations

Malta Film Commissioner Johann Grech speaks to Tourism Minister Julia Farrugia Portelli. Photo: Malta Film Commission.

The Auditor General has highlighted significant issues related to salaries and tax rebates within the Malta Film Commission concluding that MFC made ‘insignificant progress’ with regards to previous recommendations.

In a follow-up report tabled in parliament, the National Audit Office mentions a list of irregularities which the Film Commission failed to address.

The report monitors the progress of various entities like the Armed Forces, Malta Communications Authority and Church Schools among others. It appears that most of these entities reported significant progress or managed to fully implement the recommendations by the NAO. The Malta Film Commission, however, failed to impress the Auditor General.

Most of the issues highlighted in the report are related to salaries and tax rebates for production companies. In the 2016 report, the NAO had mentioned the lack of formal approvals and the divergences in salary packages. It also mentioned the complete lack of controls over allowances paid.

It also transpired that the organisational structure indicating the respective salary packages consisted of an undated spreadsheet which did not cover all positions. There were instances where salaries paid to employees exceeded the amounts stipulated in the organisational structure, with certain individuals being in receipt of allowances for which they were not entitled to.

The NAO had encouraged adequate control over the payment of allowances. However, this new follow-up report concluded insignificant progress in this regard.

“The Commission’s organisation structure, which was valid up till year 2018, was not updated by the time this follow-up audit was concluded. Negotiations were still underway between MFC and the pertinent Unit to update the former’s grading salary structure for the four-year period 2019 to 2022.”

Instances of divergences between salaries and allowances paid to officers as per payslips and those stipulated in the employment contracts were once again noted. Following further queries, the Malta Film Commission said it carried out an exercise to align salaries and allowances paid to its staff with the employment contracts.

The National Auditor had mentioned the lack of effective controls with regard to income attributable to Government in the form of payable tax. The NAO had said that while the Government paid significant amounts of money to film production companies by way of cash rebates, audit findings showed that no effective controls were being carried out.

“It was recommended for MFC to extend the remit of its auditors to verify the eligibility of the cash rebates, confirm their validity and ensure that revenue due to Government is duly paid and any irregularities reported in a timely manner.”

This particular recommendation by NAO was only partly implemented. The management said that revision of the cash rebate guidelines adopts a stricter stance with respect to the necessary verifications.

Another issue to which the NAO pointed out was the income tax of actors.

In the 2016 report, NAO had pointed towards the fact that the amount of income tax paid by actors could not always be verified due to lack of documentation. Management was recommended to carry out thorough checks, confirming that income considered to be earned in Malta has been declared in full.

According to the follow-up report, this recommendation was partly implemented. In 2019 measures were introduced where production companies had to present the adequate documentation when applying for financial incentives.

“From testing carried out on the sampled production it was noted that the income of €44,499 earned in Malta by 22 foreign actors was supported by the necessary documentation. However, receipts to confirm that the relative tax portion of 10% was remitted to IRD, were only traced for two individuals.”

The management claimed that the tax portion for the remaining 20 actors was paid in the respective employing country.

Concluding the recommendations on the Film Commission, the NAO mentioned the need for more thorough checks especially in the light of updated cash rebate guidelines.

The Malta Film Commission has been at the centre of harsh criticism following a revelation by The Shift which showed how the entity was leaving out many local film production companies from the list of registered companies.

Sources had mentioned how the list of companies which is sent to foreign film companies by the Film Commission only displays seven local companies leaving many other established companies out of the game.

The news led for the Producers Association to call on the immediate removal of Johann Grech as film commissioner. Despite the outcry from the public and those in the industry, Tourism Minister Julia Farrugia Portelli has failed to take any action.

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