Case over abusive sale of duty-free diesel settled out of court

An out-of-court settlement has been reached in the case involving abusive sale of duty-free diesel, Parliamentary Secretary Tonio Fenech said in Parliament yesterday.

He was replying to opposition questions when Parliament started to debate in committee a bill to implement the measures announced in the budget.

During the debate on a clause raising duties on a number of items, as announced in the budget, opposition finance spokesman Charles Mangion asked what had happened in the case. Had legal action been taken against anyone?

Mr Fenech said action had been taken and a number of vehicles seized. This had not been a case of contraband but duty-free diesel had been used in places from where it could not be distributed. In terms of the law, the Comptoller of Customs had opted for an out-of-court settlement whereby the person involved had paid substantial amounts.

Anglu Farrugia (MLP) said this abuse had been going on for a long time and constituted contraband. He asked whether the government would publish the findings of the inquiry which had been held. Since the abuse had been going on for months, how far back had the investigation gone?

Mr Fenech said the government had taken action and changed the way duty-free diesel was sold, to eliminate the possibility of abuse.

The inquiry was not conducted by the comptroller but by a magistrate and it was not within his competence to table the findings.

Earlier in the debate, Mr Fenech said the bill was authorising the government to borrow up to Lm150 million. This did not mean that the government would borrow so much. Part of the Lm150 million would go to finance the deficit, but the government would also have the flexibility to make new borrowing should interest rates be favourable, substituting borrowing made at higher interest rates.

Dr Mangion asked if the government could force holders of government stock with high interest to redeem their stock before maturity.

Mr Fenech said the government could not do that, but it also had other loans, such as the borrowing originally made by Malta Drydocks from the banks, which could be refinanced through the issue of new stock at lower interest rates.

Turning to other clauses, Mr Fenech said the minimum tax of Lm5 on travel insurance policies was being replaced by 10 per cent tax of the insurance premium, since there had been times when the tax had been higher than the premium. This, Mr Fenech said, had discouraged people from insuring themselves before they went abroad.

Asked whether this would mean loss of revenue for the government, Mr Fenech said it was expected that more travellers would now opt for travel insurance.

Dr Mangion said this was an example of how lower tax eventually translated into more activity. This applied to the economy in general.

Mr Fenech said he agreed that one should ease taxation to boost the economy, but that had to be done with an eye on fiscal consolidation.

During the debate on amendments to the Excise Duty Act, Mr Borg noted that this section imposed a tax on mobile telephony services, raised duty on kerosene, reduced the price of biodiesel and raised duty on tobacco products. He moved an amendment reducing excise duty on fuel for Gozo Channel ferries so as to make up for the fact that the company was absorbing VAT paid by its clients.

Dr Mangion said it was unacceptable that the price of kerosene was being practically doubled because of abuse by some people. Had an assessment been made since the budget on the impact of this measure on households? He knew of several cases where people could not heat their homes during these cold days. This measure had also affected the economy. It had caused an increase in the price of bread and hotels were facing higher costs to use their boilers. This measure had also raised costs for poultry producers at a time when they were fighting tough competitive pressures. Rather than take measures which harmed the people, the economy and the environment, it would have been better if the government clamped down on those who made abusive use of kerosene. Clearly, the government was only bent on raising its revenue.

Mr Fenech said the government had decided to stop its subsidy on the price of kerosene after studies showed that the subsidy was not really going to help families heat their homes, but to benefit the commercial sector. Only 2.5m litres of kerosene were used for domestic heating, yet Enemalta sold 22 million litres of kerosene in the first nine months of last year, and the highest turnover was in summer, which meant that hotels were hardly using this for heating. A survey had shown that only 35 per cent of families bought kerosene, and just over a third of them used it for heating.

The government had considered various alternatives, such as setting a quota of sales of kerosene and registering big consumers, but the system would have been too costly. Indeed, the government was giving compensation of Lm14 for those needy families which used kerosene for heating.

Dr Mangion said the parliamentary secretary was not convincing in his reasoning. Clearly, the government had not calculated the impact of this measure on ordinary families. And there was no denying that this measure had had an impact on industry. Even the price of bread had gone up as a result.

Mr Fenech recalled that a Labour government in 1998 had introduced the same measure which the present government was re-introducing now. So why had Labour now changed its position?

Dr Mangion said the price of kerosene under Labour had not risen so steeply. And the government also needed to consider the fact that it was imposing a 17 per cent surcharge on electricity, even though the international price of fuel oil had not gone up as much as crude oil.

Dr Fenech said the people could see on the media how the price of oil had risen. That applied to the raw material and its by-products. The government was imposing a surcharge, which would be removed when oil prices subsidised, whereas the Labour government had raised power prices higher than what consumers were paying now, surcharge and all.

Joe Brincat (MLP) said there should be a minimum entitlement of kerosene at a special price for the families which needed it.

Mr Fenech said low income families would receive the Lm14 compensation for the use of kerosene and they would not be subject to the electricity surcharge.

Dr Brincat said the Lm14 compensation was inadequate. Malta, now an EU member, was sharing the European cold, but heating costs here were much higher than the rest of Europe.

Opposition leader Alfred Sant asked whether VAT would be charged after the increase in duty, in this case on kerosene.

Mr Fenech said VAT was charged on the final price.

Dr Sant asked by how much, therefore, was tax rising in percentage terms.

Mr Fenech said he could not give percentages, but the purpose of this measure was for the price of kerosene to be the same as diesel.

The debate continues today.