Fabian Demicoli

Accounting Requirements: Micro-Entities

 Following reports in the media on Government's intention is to opt out of the important European proposal directed at alleviating the accounting burden on the smallest businesses, GRTU has written to Government in this regard:

 

If this is so Government has taken this decision on a policy that is important and of direct impact on SMEs without any kind of consultation with the GRTU as the legal social partner representing businesses. GRTU's position has been that of persistently insisting that small businesses in Malta should be given the facility to do away with extensive financial returns.

At present, micro-entities, are required to draw up elaborate annual accounts and have them audited. In addition to diverting valuable manpower from these small companies with extremely limited human resources, the requirements also represent a high annual cost.

Government's GAPSE (General Accounting Principles for Smaller Entities), which was introduced without the support of GRTU, is not sufficient compared to what the Commission is trying to achieve. At the same time however GRTU also recognises a number of issues that we admit do not make it easy for the complete dismantling of the requirements, such as:

  • Most enterprises will keep filing accounts anyway for national administrations, banks, suppliers and customers
  • Decrease in transparency
  • Creation of an uneven playing field between those Member States opting to utilise the exemption and those opting not to
  • Accounts as a fundamental tool of proof of financial solidity of an enterprise
  • Suppliers will want to know if the business they are dealing with is solvable and reliable in order to avoid the plague of late payments.

These arguments have led to GRTU's insistence on a very abridged accounts statement, which while reducing the costs for small business owners, will also satisfy the basic needs for accounting requirements.

GRTU therefore asks for a more abridged form of GAPSE as it is still too cumbersome and costly. In the absence of this, GRTU will then opt to fully support the Commission's proposal. GRTU in any case disagrees with the Government's decision to withdraw unless an agreement is reached on an ameliorated and abridged form of what exists today.

In line with the EU's Better Regulation Program and the European Economic Recovery Plan, the direction taken by the Commission will at the end of the day push Member States to reduce the burden on micro-enterprises from the scope of the burdensome EU accounting Directives and to align the reporting requirements of micro-entities to the real needs of users and preparers of the accounts. Malta is now choosing to take a different policy action, however maintaining GAPSE is not enough.

Malta is still committed to a Better Regulation Policy in this decision. A simple opt-out would severely threaten the credibility of the Government's p\romises to reduce administrative burdens and to create a healthier regulatory environment for SMEs. Government's move to ameliorate the accounting requirements would be entirely in line with the Think Small First principle and a clear and tangible measure to help SMEs.

After years of GRTU's leading members to accept the EU acquis and helping them deal with all the heavy burdens involved, we now expect that Government do its utmost to mirror EU efforts in their favour.

We have urged Government to officially consult the GRTU. To date other that an acknowledgement of receipt of our letter, GRTU has received no communication from the authorities in this regard.

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