News | Wednesday, 13 May 2009

Ministry waits for AG decision to appeal on VAT interest case

Karl Stagno-Navarra

The Ministry of Finance is waiting for the recommendations of the Attorney General on whether it should appeal from a court decision delivered last Monday against unjustified interest rates charged by the VAT department on outstanding dues contested before the VAT Board of Appeal.
The constitutional application filed by Clayton Communications Co. Ltd against the Prime Minister, the Attorney General, the Commissioner of VAT and the VAT Appeals Board; was upheld by the court since the imposed interest rate of 1 per cent per month was “tantamount to depriving an individual of access to the courts”.
The Finance Ministry yesterday told Business Today it was waiting to see what the Attorney General is recommending with regard to appealing the court ruling, given that the decision “may have implications” on many other pending appeals before the VAT appeals Board.
Clayton Communications pleaded that it had a dispute with the Commissioner of VAT and had lodged an appeal that was pending before the Appeals Board, but interest was still being charged on the outstanding amount in dispute while the case was still pending.
The company complained that the interest rate imposed was counter to the principle of equality of arms during a dispute, while it had the effect of discouraging an individual from appealing before the VAT Appeals Board.
Judge Caruana Demajo ruled that Clayton Communications Co Limited was not contesting the imposition of interest, but the fact that interest was running due to the lapse of time until the Appeal Board appointed its appeal for hearing was unjust.
Consequently, the company was being charged interest due to unjustified delays on the part of the same Appeals Board and not through a delay on the company’s part.
The court ruled in favour of Clayton Communications Co Ltd after noting that the interest rate was much higher than that normally charged on debts of a private nature, and therefore the rate was of a punitive nature.
The ruling went further to note that the State, which included the Appeals Board, “could benefit from the failure to act on the part of the Board.”
In conclusion, it ruled that there was a violation of the company’s right to access a court.
Judge Caruana Demajo ordered that the rate of interest which the company was bound to pay could not exceed the normal legal limit established by the general laws of the country.
The ruling is reported to have let many to reconsider their position, following the numerous recommendations given by accountants not to contest their VAT bills because of the interest charged while the Appeal Board hears the case.
Many accountants considered the interest charge during appeals, as “intimidatory”.
Dr Robert Attard appeared for Clayton Communications Co. Ltd.

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13 May 2009

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