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Kurt Sansone
The legislative amendment granting the VAT Commissioner special powers to hypothec property belonging to VAT defaulters was approved in Parliament and is only waiting for the third reading, which is just a formality before the bill becomes law.
The controversial amendment, included in a bill that contained numerous amendments to various laws, grants the VAT Commissioner the right to “register in the public registry or land registry, as the case may be, a note of privilege”, which would take priority over any bank hypothec. The measure is bound to have serious consequences for the credit of VAT-registered individuals and companies especially in an economic climate where many companies are facing serious cash flow problems.
But Parliamentary Secretary Tonio Fenech, yesterday defended the amendment saying it was needed to ensure Government would be able to recover its money. Contacted by MaltaToday, Fenech said the Commissioner of VAT always had a right of privilege when recuperating money owed to the department.
“A tribunal decision, however, decreed that the VAT Commissioner had to register the note of privilege. This amendment puts into force the tribunal’s decision. The reason why overdue VAT payments are covered by privilege is because that is money collected on Government’s behalf by the company in question. VAT does not belong to the company in the first place and this amendment will facilitate the department in collecting money owed to it,” Fenech told this newspaper.
The finance parliamentary secretary insisted that unless the VAT department was privileged in registering a hypothec to claim back money owed to it, banks would foreclose and Government would find it very hard to collect its share.
On Monday, Labour deputy leader Charles Mangion had asked government to reconsider the amendment by including a clause stating that the VAT department’s hypothec would not enjoy privilege over the banks.
“If we were to do that, we might as well not have amended the law,” Fenech told this newspaper.
The initial bill presented in Parliament contained a second amendment, Article 25, which sought to grant privileged powers to the VAT Commissioner in retrospect. But this amendment was dropped after concerns raised by the Bankers’ Association.
The contested article was dropped during a cabinet meeting during which various ministers expressed disagreement with the proposal.
Even if government’s actions are intended to stamp out abuse, the commercial community is fuming since many small companies are finding it hard to collect money owed to them by creditors. In some instances, companies are ending up paying the VAT department tax that has not yet been recuperated from clients.
The Prime Minister has gone on record blaming lower tax revenues from income tax and social security for the first five months of the year on the cash flow problems faced by some companies.
The granting of wider powers to the VAT commissioner has only served to put companies on edge at a time when the economic climate is anything but encouraging for entrepreneurs.
kurt@newsworksltd.com
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