A Budget that extends the safety-net for Businesses, more tax incentives should follow to enable new investments
19 October 2020
Budget 2021 The Malta Chamber of SMEs is pleased to see a number of its...
Another issue GRTU has this time is with the Ministry of Finance. This is yet another case where GRTU enters into agreements in good faith with Government and then someone realizes that this agreement is not good for Government and decides to unilaterally force a change. This is the Time line of events:
200% TAX CREDIT ON EXPENDITURE MADE BY PHARMACIES TO IMPLEMENT P.O.Y.C. AS PER POYC M.O.U. signed July 2007.
On page 12, Appenix "B" of the Memorandum of Understanding (MOU) signed with GRTU on behalf of pharmacy owners together with Chamber of Pharmacists on behalf of Managing Pharmacists, it is stated that:
"Government will implement a Tax Credit Scheme of up to 200% of the actual expenditure on software and equipment necessary for the implementation of the POYC subject to a maximum capital expenditure of LM 3000"
This one time fiscal advantage was given as an inducement to Pharmacies to join the POYC Scheme without going through much unnecessary capital expenditure necessitated by the movement of patients from Government distribution centres to pharmacies in the community.
During the final meeting prior to the signing of this MOU, to which all parties were present including the Permanent Secretaries at the Ministry responsible for Medical Services and the Ministry responsible for Finance as well as the GRTU and the Chamber of Pharmacists, it was agreed that this 200% will be given to Pharmacies in Tax Credit, and was clearly made to be understood that up to a maximum capping of LM 3,000 x 2 (200%) = LM 6,000 (€ 13,976.24) will be deducted from Tax DUE to the Commission for Inland Revenue (CIR).
Well after the agreement was signed, the CIR contacted GRTU stating that it was technically difficult for CIR to carry out the Tax Credit obligation mentioned in the MOU unless a Legal Notice was published. The CIR also strangely, as other tax credit schemes exist, said that the words "Tax Credit" could not be mentioned in the Legal Notice, therefore this wording had to substituted.
GRTU was therefore called in to find a solution without effectively changing the mechanism. Initially it was agreed that since pharmacies will claim 200% of the amount spent on software, equipment, and furnishings necessary for the implementation of the POYC, the normal depreciation will not apply on the original expenditure. Therefore, pharmacies who may have already claimed such depreciation had to reverse the amount on future Tax Returns. In order however not to disrupt the accounting system on the P/L Tax Returns, it was decided to claim depreciation normally, and minus the amount of Tax saved from the total amount claimed for the Tax Credit.
When the CIR realised that the MOU allowed for a Tax Credit of 200% of the amount on expenditure made, up to a maximum of LM 3,000 (LM 6,000 = € 13,976.24), they decided to oppose the amount and insisted on its renegotiation and needed to arrive to a compromise since the capped amount agreed upon had to be indicated in the Legal Notice.
It was agreed that claim for depreciation will apply normally in addition to a maximum of € 9,000 capping will be deducted from the Tax due.
Another meeting was called MFIN to agree and approve the wording on the draft of the Legal Notice before it was published. MFIN on request confirmed that the original mechanism stated in the MOU will not be changed so that the value to members of what was granted would not be diminished. This implied specifically, apart from the applicable normal depreciation, a maximum amount of € 9,000 capping representing the 200% of the expenditure amount will need to be deducted from the Tax due by each pharmacy owner. The emphasis was clearly on the words Tax Due. The Ministry's senior Budget co-ordinator following requested also confirmed that any remaining balance after deduction from Tax due will be rolled over and be utilised during the following year/s.
Unfortunately, following the publication of the Legal Notice, GRTU and Chamber of Pharmacists were informed that the deduction will be from the taxable amount and NOT from the TAX DUE. As soon as GRTU became aware of this it immediately raised the issue with MFIN. MFIN officials have refrained from taking any responsibility and suggested we raise the issue directly with the Minister.
GRTU Pharmacy Owners Section Committee has since then made repeated attempts to set up a meeting with Minister Tonio Fenech after the issue was raised in September during GRTU's Executive Council meeting with the Prime Minister. Both the Minister and the Ministry seem unwilling to re-discuss the issue and consider it closed.
As things stand today the POYC Scheme is in jeopardy. GRTU did not want to issue directives to pharmacies participating in the scheme within the localities where POYC is already in action and greatly appreciated by patients even though GRTU is under great pressure by its members who have been assured by GRTU that they will be directly refunded through the tax credit scheme. Now the scheme is due to be extended to Malta's largest locality, Birkirkara. Already our members in B'Kara have indicated that they do not wish to fall victims of Governments incorrect interpretation of what was agreed with GRTU on the tax credit issue.
GRTU is greatly aggrieved that repeatedly now Government officials sign and approve something and then there is a Ministerial decision to disregard contracts or agreement signed after months of laborious and lengthy negotiations. This is not good governance, but it is political dishonesty.
GRTU feels this is a tremendously negative trend in Industrial Relations which will definitely lead to more strife. This is one other case were GRTU is being forced to issue directives. This time GRTU directives will stall the introduction of a scheme of which GRTU is the main backer, and GRTU considers this to be a serious breach not just of the POYC agreement but also of the supposedly good faith there exists between it and the Government.
Or is this just someone stamping his feet?
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