Efficient tax collection restricts cashflow

The cashflow crunch which is currently impeding so many businesses around the island could be at least partly down to the much more efficient collection of taxes that is now in evidence.

Speaking in an interview in today’s edition of this newspaper, Frank Xerri de Caro, Bank of Valletta’s chief officer for credit management and retail banking, admitted the banking sector was very much aware of the serious cashflow problems on the island.
"This problem is specific to the business sector," he said. "In personal banking, ironically, customers evidently have a lot of money to save and invest, but many businesses are completely stuck."
Mr Xerri de Caro said there was no doubt that the culture of bartering has restricted cashflow, and added that the bank tried to dissuade clients from this practice as much as possible.
"Another possible reason for the jam may well be the government’s efficiency in collecting revenue," he continued. "Collecting taxes when they’re due is good for the government, but it has probably restricted cashflow.
"Previously, I suspect that businesses had cashflow which pertained to government, but which was being used, even if wrongly, for these purposes."
He also highlighted the impact of the general recession overseas, but stressed that Malta’s small size was undoubtedly helping it to adapt better to changing economic conditions than some others.
"The importance now being attached to business plans, is also helping," he added. "People are growing more conscious of the returns they expect from their own business and have specific goals they want to achieve, which gives them a greater awareness of what’s going on and the need to nip problems in the bud."
See full interview on pages 10,11