Increasing excise duty to address legislative loopholes

Finance Minister accuses Opposition of ‘defending tax evasion by obstructing amendments to close tax loopholes’.

Finance Minister Edward Scicluna
Finance Minister Edward Scicluna

By “obstructing” proposed amendments to the budget measures implementation bill, the Opposition was “defending tax evasion”, according to Finance Minister Edward Scicluna.

The minister was referring to the parliamentary debate on the budgetary measures. These measures are being amended at committee stage before becoming law.

During this week’s three committee meetings, government and opposition disagreed on a number of issues – most notably government’s proposals to increase excise duty on cigarettes and cement.

The amendments to increase excise duty on cigarettes was eventually withdrawn by Scicluna, who accused his shadow minister of defending tax evasion.

On his part, Fenech argued that the government was simply increasing taxes but Scicluna was calling it fighting tax evasion.

“Tonio Fenech's obstruction to amendments intended to close tax loopholes are tantamount to condoning tax evasion,” Scicluna said in a statement issued through the Department of Information.

According to the finance ministry, Scicluna’s amendments intended to address legislative loopholes which are enabling tax avoidance.

“Despite the importance of these amendments to Government revenue, the Opposition chose to obstruct them, acting irresponsibly and carelessly with respect to tax avoidance, profiteering, unequal taxation, and the weakening of the Malta's revenue,” the ministry said.

With its nine-seat majority, all amendments put forward by the government were approved. This included measures which did not enjoy the Opposition’s support.

In the case of excise duty on cigarettes, the finance minister agreed to withdraw it.

The proposed 5c increase in cigarettes duty was meant to address a situation which arose after the Budget 2014, when prices on certain cheaper cigarettes increased beyond the change in excise tax that was announced.

“However, the difference collected was kept as profit by the distributors and not fully passed onto Government as tax due,” the ministry said.

 “Despite how the amendment was strongly advised by Customs officials, the Minister decided to withdraw the amendment due to its overly complex legality. The ministry will address the matter through other channels, in the interest of ensuring a competitive market and to avoid profiteering.”

The amendment was in fact withdrawn following an hour’s debate when tax and legal experts confirmed that complications could arise.

According to Finance, the opposition also attempted to obstruct an amendment that addressed a legal loophole affecting excise on cement.

The law, introduced by the previous administration, states that tax is applicable only to a particular type of cement, known as the Black Portland.

This led to a situation where other types of cement were being imported into the market without tax being levied or paid.

The new cement is known as Pozzolan and was not affected by the increase announced in Budget 2014. At committee stage, the government proposed that Pozzolan should be covered by the Budget 2014 excise duty and proceeded to announce a tax increase on all types of cement.

The Opposition opposed a second increase in excise duty. Fenech argued that the opposition would have voted in favour, if a second increase were not proposed.

“In opposing both of these amendments, the Opposition is not only defending tax avoidance, but is promoting tax evasion by not allowing a now known legal loophole introduced during its own administration to be corrected in favour of a more robust clause, aimed at addressing tax evasion and providing a more equitable tax scenario,” the finance ministry rebutted.

“Such attempts to sensationalise and gain political mileage from the Government's efforts to strengthen revenue and safeguard consumer rights only underline the Opposition's immaturity.”

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