NEWS | Wednesday, 19 December 2007

Government obliged to refund Lm4 million in favour of GO

By a staff reporter

Last Friday’s decision by the Court of Appeal in favour of ´GO (ex-Maltacom) means that the Government will have to refund this telecommunications operator the princely sum of around four million Malta Liri.
The episode started in the beginning of the Millennium broght about when the Value Added Tax (VAT) Department decided to charge a fee for incoming international phone calls. Back then, only Maltacom had an international exchange and enjoyed a monopoly in providing this service.
The government saw it fit to take a share of this monopolistic service by inflicting a VAT charge. A charge that continued to be levied until Malta joined the European Union (EU) in May 2004.
The then State-controlled telecommunications entity did not take it lying down and objected to the VAT bill. The government department persisted and levied the statutory penalties and interest on Maltacom for non-payment. In a wise commercial move, Maltacom reached agreement with the Government and paid an advance payment to the Exchequer without giving up its right to contest the bill. More so, Maltacom filed an appeal before the VAT Appeals Board.
The bureaucrats at the Finance Ministry got what they thought was rightly theirs. A payment from Maltacom, which according to the Financials of 2003 was for two million and eight hundred thousand Malta Liri, was included as government revenue.
The appeal continued and Maltacom won it hands down, even before the Government-appointed VAT Appeals Board.
Subsequently, the Government had sold off its shares in Maltacom and was not ready to refund what was already considered its income. So the obvious choice was to appeal before the law courts. But the latter institution administers the law blindfolded without considering who the parties in the dispute are.
And so the saga has ended with the Appeals’ Court judgement and a polite, nearly apologetic, Company announcement by Maltacom.
The end result is that the Government has to pay up around four million Malta liri and Maltacom earns the equivalent amount. This will not only boost its financial results but also add up to the cash hoard GO already has.
Since in the past, Maltacom had already reflected the cost of this alleged VAT bill in its financial statements, the proceeds are pure income to Maltacom.
It remains to be seen if this windfall will be retained by GO, or distributed to its shareholders. If the latter route is taken, this extraordinary income would be welcomed and the majority shareholder TECOM would have generated a profit in GO without any ‘strategic’ input.
In the meantime, the Government foots the bill for a pre-EU accession folly, and continues to lose out to GO, whose Smart move has pleased the Malta Stock Exchange.