Retailers optimistic about budgetary changes

By Kurt Sansone

The budget measures to cut red tape for small businesses and the self-employed are a step in the right direction but operators in the sector are hoping that they are the beginning of an ongoing exercise and not an end in themselves.

Speaking to The Malta Financial and Business Times, GRTU Director General, Vince Farrugia advised government not to rest on its laurels despite the pro-business measures announced by Finance Minister John Dalli last week.

"The measures announced by government to alleviate the burdens on small businesses are definitely positive because they indicate that government recognises the small businessman as an integral and important part of the local economy. The direction is right but we should not stop at that."

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Mr Farrugia added that the budget proposals reflected to a certain extent the pre-budget proposals presented by the GRTU. "In our proposals we had stressed the importance of giving small businesses a kick start by alleviating burdens so that they would have enough cash at their disposal to invest in their business concerns. However, the GRTU does not like the maximum ceilings introduced by government because they are on the low side."

The budget proposals have exempted companies with a turnover that does not exceed Lm40,000 from the legal obligation to keep audited accounts. In this way the Inland Revenue Department and the VAT Department will be able to enter into agreement in advance on the tax due by these small enterprises without the need of audited accounts.

In addition slightly larger enterprises employing an average of 5 persons and whose turnover does not exceed Lm100,000 will benefit from investment incentives, which encourage the use of information technology.

The budget states that expenditure by small enterprises in information technology will be set off against profits in the same year in which they are made.

Another positive measure concerns the VAT refunds due to small enterprises. These will now be received within 30 days from the date of the submission of the return provided this is filed in time.

However, the single most effective measure is the exemption from tax on income when profits are reinvested in new projects and purchase of equipment, in order to enhance and develop the business. This exemption will be made on profits in years of income 2002-2004.

The GRTU is currently conducting an exercise among its members to establish how many enterprises will benefit from these measures and how much will the savings amount to.

Mr Farrugia also talked about the general economic situation in the country, which he described as uncertain. He insisted that government’s premise, that the GDP will rise next year, is dangerous considering that for the last six months we have seen a constant decline.

"Government is assuming that it will collect the extra revenue because of an upswing in the GDP however, this is a dangerous thing to assume especially when one sees that expenditure is expected to rise even higher. The budget should have tackled the issue of government expenditure with greater resolve. Unfortunately nothing was forthcoming in this respect," Mr Farrugia said.

The GRTU director general then dwelt on tourism, which he described as one of Malta’s foreign market bulwarks. Mr Farrugia said that the GRTU appreciated the assistance given but the union expected the budget to relieve the tax burden on the industry.

Mr Farrugia explained, "Unless tourist operators find it convenient to send tourists to Malta we will face serious problems in the months to come. We have to become more competitive."

The GRTU has suggested undertaking an exercise to analyse the cost of a typical holiday package to Malta and as a result slice all the extra costs that raise the price.

Mr Farrugia continued, "we have to make sure that our price is good because if the market continues contracting owing to the international situation, we have to fight harder to retain our share."