Taxes: two weights, two measures

With a general election looming, the government has yet to decide what its approach towards unpaid taxes is going to be.

Three weeks ago, Finance Minister Clyde Caruana said in parliament that the administration would be collecting taxes due from businesses, saying they could no longer continue to use the government as an “overdraft facility”. He revealed that some €5 billion in taxes are owed by companies in Malta.

He was contradicted by Prime Minister Robert Abela, who, during a speech a couple of weeks later, depicted himself as protector supreme of those businesses ‘terrorised’ by “law enforcement and regulatory bodies”, by saying that the self-employed and businesses should not keep knocking on doors but should go directly to him so he can defend them.

Abela later announced that workers and students will receive cheques worth €100, while pensioners and people on social benefits will receive up to €200 as part of a cash injection to the economy. This, the prime minister added, is over and above the tax refunds ranging from €60 to €145 that were previously announced in the Budget.

Former Finance Minister Tonio Fenech criticised the refund announcement, saying that “this is no tax refund, many recipients have not even paid tax let alone deserve a refund. This is buying votes with our own money”.

The Opposition also criticised this move by noting it was nothing but a distraction from the fact that while families are struggling to cope with the steep rise in the cost of living, reports emerged that the prime minister’s law firm Abela Advocates was taking more than €17,000 a month from the Planning Authority.

Creating a favourable environment to attract and promote businesses, be it local or foreign, should not even be remotely equated with, or subliminally suggest, leniency towards illegal or semi-legal activities by business people, companies, or influential industries, nor with crafting favourable deals for big projects at the taxpayer’s expense.

Electrogas

Last week, The Shift exclusively revealed how, with a one-sentence email, the Tax Commissioner exempted Electrogas from paying tax on the profits expected on the completion of the Melita TransGas Pipeline project – an estimated €84 million windfall for Electrogas and its shareholders.

In addition to this, the Tax Commissioner also signed off on Electrogas’ proposal to treat the €30 million to be paid to acquire the concession as a VAT-free “tax-deductible expense”, further reducing the consortium’s tax exposure.

In 2020, The Shift reported how former Minister Konrad Mizzi’s eleventh-hour intervention in 2017 “gifted” Electrogas another €40 million by transferring the burden of paying excise tax on imported LNG onto Enemalta and, therefore, onto the taxpayer.

Steward Healthcare

The Shift also discovered how the company managing three of Malta’s public hospitals through a concession worth €2.1 billion owes the government a staggering €37 million in unpaid VAT dues.

A judicial letter filed by the Tax Commissioner earlier this month gave Steward Healthcare two days to pay €36,534,160 in outstanding VAT owed to the State’s coffers, which have been accumulating over several years.

The company has taken exception to this and is arguing that “corruption” that happened when the concession was in the hands of Vitals Global Healthcare has nothing to do with Steward Healthcare. Yet the catch is that one man was at the helm of both companies and at the centre of all negotiations – CEO Armin Ernst.

Malta’s main political parties

An analysis of financial statements presented by the companies belonging to the Labour Party and the Nationalist Party found that both parties have accumulated tens of thousands in penalties that have not been settled.

The Shift also found that not a single company owned by the political parties is in line with the law, with some companies not having presented their audited accounts for decades, with obvious tax implications.

Creative tax compliance certificates

Another investigation by The Shift uncovered an ingrained system of impunity, condoned by the government, where vague tax compliance certificates are being issued to companies owing millions in unpaid taxes to public coffers, allowing them to continue to win multi-million euro public contracts while defaulting on their tax obligations.

According to public procurement rules, economic operators – both companies and individuals – who have social security and income tax arrears are not allowed to bid for public tenders. The rules clearly state that prior to signing a contract for public works, the economic operator involved must present a compliance certificate stating that the company has no tax dues.

The way this is done is if a company owes the government millions in tax arrears, it is allowed to reach a private agreement with the Inland Revenue Department to start paying its dues, in instalments, over a determined period. When this so-called tax ‘settlement agreement’ is reached, the government issues a clear compliance tax certificate, allowing the same economic operator to carry on and sign a pending tender contract he would have won even when taxes have not been paid.

An example of this is how Infrastructure Malta last year awarded Polidano Brothers, supposedly blacklisted, a contract for various road works at the Luqa industrial estate while allowing them to bid for various multi-million infrastructure projects where he is set to win despite his reported €40 million tax bill. The Shift is informed that there are hundreds of companies like Polidano’s that are being allowed to break the rules.

Reckless with public funds

Taxation is perhaps one of the more fundamental features of the relationship between citizens and governments and should be a prominent element of Malta’s public discourse. However, all this pro-business rhetoric, often resorted to by both political parties with gay abandon, has us forget that a government has interests other than businesses to look after.

Sure, the Labour government’s official line is that it loves and supports all businesses, but it is exactly because of this vague idea that the more powerful industries where people close to the Labour Party are at the helm have been able to get the “concessions” described.

When some businesses get such special treatment, including not paying their fair shares of taxes, not only do other businesses suffer, but they are increasing the tax burdens of other members of society.

Think of how Konrad Mizzi transferred the burden of paying excise tax on imported LNG onto Enemalta which is then passed on to the Maltese taxpayer. Or how the government has been forced to top the €90 million a year already allocated to Steward Healthcare with additional funds to buy back a multi-million euro cancer treatment equipment left unpaid and idle in boxes for years.

The government is reckless with public funds and taxpayers continue to see their contributions routinely squandered in an endless string of phantom consultancy jobs for party loyalists, outrageous golden handshakes, the subversion of the public procurement process, overstaffing of government departments, and on large scale energy and healthcare projects that have siphoned millions away from Malta with no corresponding benefit accruing to the Maltese people.

Then the President trots forward to lament about the prices of cancer medicines. If all that money had not gone down the drain, the State would not have had difficulty paying for even the most expensive cancer treatments. Instead, patients are forced to beg at events like l-Istrina that make the government look good while taxpayers are asked to fork out more money.

Did Electrogas really need to be exempt from paying taxes on the profits it was projected to make?

All the while, debt levels have shot up to an unprecedented record of over €8 billion. The government is increasing its spending at an alarming rate, driving up the deficit to record highs, according to the most recent government statistics.

Meanwhile, we are expected to stand by until the Labour Party secures another electoral victory by squandering taxpayer money, and then brace ourselves for what will follow.

                           
                               
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Joseph
Joseph
3 months ago

What I am finding truly depressing is the response to your GoGetFunding appeal for FOI poorly supported. It says a lot about the direction this country is heading.

Glen
Glen
3 months ago

Who signed off the 17,000 euro monthly retainer direct order from the Planning authority to Robert Abela? Can the Finance Minister inform the general public please?

Last edited 3 months ago by Glen
Ben
Ben
3 months ago

Why did the Malta Gaming Authority give 3,000 euro monthly direct order to Gordon Cordina’s, firm. Cordina also happens to be the Chairman of Bank of Valletta. Isn’t that a clear conflict of interest?

Leanne
Leanne
3 months ago

The FIAU is nowhere to be seen in all these Government scandals. Isn’t the FIAU supposed to be independent? Alfred Zammit, FIAU s deputy director signed off a clean bill of health to Pilatus Bank. Is he being investigated?

KLAUS
KLAUS
3 months ago

Everything that could cost the PL votes has been removed from public view. Unfortunately, it’s too much. Way too much. It’s all boiling up now one by one and now showing these mafia connections. One wonders meanwhile there is really still real and honest Labour? Or are there only greedy politicians who do not care about the party and the ‚normal‘ people?

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