Traders ‘alarmed’ by illegal imports from Sicily

Sicilian traders are not the only ones benefitting from trade loopholes and lax controls: a growing number of Maltese traders are resorting to importing goods via ferry as they attempt to drive their costs down and become more competitive

Finance Minister Edward Scicluna has been inundated with requests to remove or modify the eco-tax imposed on goods imported from Sicily.

Social partners, including the GRTU, the small business chamber, and the Chamber of Commerce, have submitted a plethora of Budget 2015 recommendations over what they perceive as an “unfair” tax which creates an uneven playing field for retailers.

A number of foreign and Maltese traders evade VAT, excise duties and eco-tax by importing goods using the catamaran link between Malta and Sicily.

Unlike goods which reach Malta through the Freeport, goods transported on the catamaran are not controlled.

Speaking to MaltaToday, GRTU CEO Abigail Mamo explained that Maltese and foreign traders are flooding the market with products, ranging from alcoholic and non-alcoholic beverages to IT equipment, brought in on the catamaran.

She said that 75% of the GRTU’s 2015 Budget recommendations centre around the removal or revision of the eco-tax and how government controls could be strengthened.

“At this summer’s trade fair there was a great number of Sicilian traders selling their goods and most probably most of them imported their products using the catamaran. This allows them to circumvent the eco-tax and VAT, which are paid on products imported through the normal channels,” she said.

However, Sicilian traders are not the only ones benefitting from the loopholes and lax controls. A growing number of Maltese traders are resorting to importing goods via the ferry service as they attempt to drive their costs down and become more competitive. 

“The situation is alarming and if no action is taken by the government, the exception will become the rule,” Mamo warned. 

Admitting that the tax “is not liked by the business community,” the finance minister’s spokesperson said “we are still evaluating a number of proposals.”

Asked whether the government is considering increasing surveillance on the importation of goods from Sicily via the catamaran, the spokesperson told MaltaToday that “rather than increasing surveillance it is improving on inter-ministerial cooperation.”

The eco-tax is paid on goods imported from abroad, however goods brought in on the catamaran do not go through the same controls as goods passing through the Freeport.

Using tablet computers as an example, Mamo explained that such products carry a €35 eco-tax plus VAT, however if a trader brings in tablets on the catamaran these are sold €41 cheaper on the market.

Moreover, the lax controls on goods brought in on the catamaran mean that there are no reassurances on whether the goods are in line with environmental and safety standards set by EU directives.

Mamo added that one of the main problems lies in the fact that the government’s control mechanisms are splintered.

Despite setting up a task force, involving social partners, the government has so far failed in delivering upon its promise of creating a single entity merging the Customs Department with the VAT and inland revenue departments.

Asked whether the government intended to implement its promise, the minister’s spokesperson said “the merger is ongoing. At present the departments are merging common functions as per plan.

In July, Prime Minister Joseph Muscat said that the situation would no longer be tolerated and that a level playing field must be ensured, adding that Sicily is part of Europe and imports coming from Sicily cannot be treated any differently. “In this regard, and in full respect of EU rules, the government is currently compiling a new and updated package of market surveillance rules in order to ensure a level playing field.”

However, the GRTU CEO noted that so far the government has not tightened controls, adding “the onus is on the government to ensure that rules are observed and the single market is respected.”

To the surprise of the stakeholders present, Scicluna this week said “Sicily and Malta are both in the EU and [traders] coming from Sicily are just as if they were coming from Gozo.

Addressing a pre-Budget consultation for social partners and employer organisations, Scicluna was quizzed by the GRTU about illegal cross-border retail trade, making the point that some €41 million less in customs and excise duties were collected in the first six months of the year.

Scicluna acknowledged the reality of business sectors that were against further liberalization of the market, since they were benefiting from current inefficiencies.

“One obstacle, for example, is the Hal Far groupage centre. I can assure you that we have gone into this matter. We have found a lot of sectors that are gaining from this present situation. It needs investment and thought as to how to liberalise this [sector], in the sense that trade coming from the Freeport should not have any extra burdens that we could do without,” he said.