Fabian Demicoli

Court orders refund for firm not in VAT scheme

Court orders refund for firm not in VAT scheme
A Constitutional Court yesterday ruled that the fundamental human rights of a company had been breached when it paid tax and interest owed for 1995 without benefiting from the tax reduction scheme introduced, some time after, during the Budget for 2002.

Court orders refund for firm not in VAT scheme
A Constitutional Court yesterday ruled that the fundamental human rights of a company had been breached when it paid tax and interest owed for 1995 without benefiting from the tax reduction scheme introduced, some time after, during the Budget for 2002.

In a landmark judgment, Mr Justice Lino Farrugia Sacco ordered the VAT Commissioner to include Woodline Limited in the tax reduction scheme and refund the difference between the amount that the company paid in penalties and interest for VAT owed in 1995 and that which it was to pay under the scheme.

Woodline Limited had filed an application, in the First Hall of the Civil Court in its Constitutional Jurisdiction, in which it explained that the company owed Lm53,871 in VAT, Lm28,726 in additional tax and penalties and Lm5,322 in accumulated interest.

Woodline had undergone the procedures necessary according to law and, while the procedures were still pending, the company received a formal letter.

The letter informed the company to pay the tax and interest due and that, if it failed to pay, necessary warrants would be issued and criminal action taken. Due to this pressure the company paid Lm87,920.

Subsequently, Woodline added, the VAT Commissioner issued a scheme for the reduction of additional tax and informed all those who had not paid that they would benefit from a 90 per cent reduction on penalties on VAT owed for 1995, which was the year for which Woodline had paid.

Moreover, according to the scheme, the interest rate was to be reduced to the minimum amount.

This, the company argued, was in breach of the European Convention for Human Rights as it constituted a discrimination based on two types of people: those who abided by the law and paid VAT and money owed, and those who did not abide by the law but then benefited from a reduction and ended up paying less than owed.

Due to the VAT Commissioner’s actions the company claimed it suffered discrimination as it entered financial difficulties to pay all that it owed when those who did not pay benefited from an amnesty that translated into thousands of pounds.

Woodline called on the court to declare that its fundamental human rights had been breached in terms of the European Convention and to provide it with a remedy.

Mr Justice Farrugia Sacco also heard the VAT Commissioner argue that Woodline did not suffer any prejudice. Just because the scheme was introduced, through which those who satisfied certain criteria were given a penalty reduction, it did not mean that those who paid tax had been discriminated against.

The commissioner added that any amnesty scheme involved people being exempt from their obligations.

The authorities applied an amnesty from time to time so that, from the practical angle, public administration was made easier by avoiding procedure that may turn out to be useless. There was nothing discriminatory in resorting to an amnesty to carry out a general clean-up, the commissioner argued among other things.

On evaluating the submissions made by Woodline and by the VAT Commissioner and after examining relevant case law, Mr Justice Farrugia Sacco ruled that through his actions the VAT Commissioner had breached the company’s fundamental human rights.

The judge provided Woodline with a remedy by ordering that it be included in the tax reduction scheme and that the difference in money paid and due be refunded.

Dr Edward Zammit Lewis, Dr José Herrera and Dr Adrian Camilleri appeared for Woodline, while Dr Carmelo Grima appeared for the VAT Commissioner

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