The Prime Minister of Malta, in a press conference held yesterday morning together with Finance Minister Scicluna and Economy Minister Schembri, announced a package of tax and economic measures in order to address the impact COVID-19 might leave on the Maltese economy.
Like other Member States, Malta's initiative is in line with the European Commission's recommendations, which were reflected in a press statement made by EU Competition Commissioner Vestager on Friday 13 March. The European Union usually has strict rules restricting state aid. State aid can take the form of cash grants, or preferential tax treatment from government to a particular business or industry.
Working within EU state aid rules, Member States can now adopt measures such as wage subsidies, suspensions to corporate and value added taxes of social contributions, or grant financial support directly to consumers, for instance consumers affected by cancelled services, where these are not reimbursed by the operators concerned. The Commission is also preparing a special legal framework under EU treaty rules, in order to allow EU member states to, if necessary, adopt additional national support measures to remedy a serious disturbance to the state's economy.
The measures announced by the Maltese government yesterday aim to support those sectors of the Maltese economy which will be most affected by COVID-19, such as the tourism, hospitality, accommodation, entertainment, transport, and some manufacturing sectors.
The measures will apply to employers and self-employed persons, and are the following:
- March and April tax payment deadlines relating to Provisional Tax, Social Security Contributions, payments under the FSS and VAT will be postponed to a further date. It is understood that businesses will be given adequate time to gradually pay the suspended tax due;
- fast-tracking of repayments of certain refunds or credits due to the taxpayers, such as VAT refunds;
- introduction of a refund scheme for companies which have invested in teleworking, where they would be entitled for a refund claim on part of the expenditure incurred to adopt such infrastructure.
It appears that legal notices bringing these measures into effect will be published shortly. Although the fine print is yet to be seen, we feel that there are several issues which the Government of Malta should take into account. Some of the issues which need to be considered and properly addressed in relation to these measures include:
- a clear and specific indication of the categories of businesses which can benefit from these measures. For instance, will all MTA-licensed operators (ranging from hotels to Airbnb hosts, restaurants to cafes) fall within the category of persons eligible for assistance in tourism or hospitality sector?
- similarly, a clear and specific indication of whether all of the entertainment sector, including digital entertainment, be able to benefit? It is already clear to us that both land based as well as online gambling licence holders are feeling the brunt of COVID19. But this is equally true of events type businesses ranging from party organisers to cinemas and laser-tag type activities.
- a clear role for the competent body overseeing the implementation of the measures and which could decide the eligibility or otherwise in case of uncertainty;
- a realistic timeframe of when taxpayers are expected to receive expedited tax refunds or credit due;
- any discretion or possibility to extend the measures to other sectors in the event that the impact of COVID-19 continues to escalate;
- guidelines on how any suspended payments will be paid in the future: will they be payable as lump sums or in instalments? Might either of these situations create unforeseen hardships on some particularly hard-hit sectors?
- a confirmation as to whether interest would be charged on the deferred payments.
We applaud these measures, a first step which will no doubt be of benefit to the sectors of the economy which they cover, and look forward to reviewing the legal notices bringing these measures into effect as soon as they are published. The devil is always in the detail, though we're hopeful that the solidarity being shown by the government and all in these strange times will also be the driving force in the application of these special measures.
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