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A bill presented in the House of Representatives proposes to extend the powers of the VAT commissioner to allow him to register a hypothec on immovable property of whoever fails to pay outstanding VAT owed to the government.
It transpires that the cabinet is reconsidering this bill.
But there is nothing to prove this other than a statement by Vince Farrugia, the GRTU chief on a private TV station. If this bill becomes law the VAT Commissioner’s hypothec would also take priority over any bank hypothec, a measure that is bound to have serious consequences for the credit of VAT-registered individuals and companies especially in an economic environment where many companies are seriously cash-strapped.
This state of affairs is unacceptable. In a depressed economy, this draconian measure would drive more businesses to the ground and urge many more entrepreneurial individuals to move to other pastures.
There is indication that this bill was created and pushed by senior civil servants without the consent of the finance minister. If this is the case it says more about the finance minister than the civil servants. The Inland Revenue is under immense pressure to rake in more revenues for the government. The government is under obligation to find the right balance to encourage economic growth and fiscal morality.
This grand balance comes about if politicians put common sense and economic vision before cold calculating policies.
These new powers would allow the VAT commissioner to register a note of privilege for the outstanding VAT in the public or land registry, if a taxpayer fails to make payment within 30 days after the Commissioner requests payment of any tax and administrative penalty.
To make matters worse the powers have been shrouded in the form of an omnibus bill that proposes a series of amendments to various laws all at once, camouflaging the contentious proposal amongst innumerable amendments.
Once the bill is approved in parliament, the VAT commissioner will be able to hypothecate the amount owed by debtors on their property, taking priority over any bank hypothec.
By registering a note of privilege, the consequences would mean that banks would refuse credit to businessmen and other VAT-registered individuals, who would not be able to sell off their property unless they pay off their outstanding VAT.
There are those in the media who applaud the government whenever it emphasizes the collection of taxes. In doing so, they miss the bigger picture.
They cannot understand that the business community and businesses in general are downtrodden by three salient considerations.
Firstly a general depressed growth, augmented by a glum world economy and a visionless government. Secondly, a dire cash-strapped economy where payment terms are dangerously long. And thirdly, by an increased cost base that is making the whole reason for doing business counter productive and unfruitful.
The real problem lies in the dearth of serious economic advisors.
The time has come for the Prime Minister to seriously consider building a team of advisors that can steer through the bog land we have landed ourselves in.
He cannot continue to set his economic agenda on the whims of senior civil servants who characteristically have never looked at the bigger picture.
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