The government has been forced to extend a scheme to waive penalties for VAT arrears after the deadline expired with defaulters having paid up just Lm2 million of the Lm21 million they owe.
The government had offered to waive up to Lm5.1 million owed in penalties as long as the defaulters regularised their position by the end of June. The scheme has now been extended to September.
The Parliamentary Secretary in the Finance Ministry, Tonio Fenech, admitted he was disappointed that only relatively few of the 6,600 operators who had defaulted on their VAT payments opted to take advantage of the scheme, introduced last February.
The scheme covers a waiver of VAT penalties incurred in 1999 and a waiver of additional tax imposed in line with the 1998 VAT Act.
It also involves measures for the accelerated payment of VAT refunds to self-employed and small businesses with fewer than 11 full-time employees and whose turnover does not exceed Lm250,000.
Mr Fenech told The Times he intends to hold meetings with accountants and tax officials in the coming days to analyse the situation and to encourage defaulters to pay up.
He did not rule out trying to come to some form of arrangement with commercial banks over the transfer of money owed to the department.
"Operators shouldn't do business out of the government's funds. I prefer operators to come clean on their own rather through a costlier legal remedy," he warned.
Mr Fenech said that he had also been requested by the Malta Hotels and Restaurants Association to extend the scheme, since many hotels suffer from liquidity in the early months of the year.
"The special scheme is one of the best the government has offered," Mr Fenech said, though he could not put his finger on why so many had decided to ignore it.
"Some might have a cash flow problem, others might think that we can offer an even better scheme, or even waive the interest - but this would not be fair on those who have regularised their position."
He urged companies facing liquidity problems to make the necessary arrangements with banks - bank interest rates are, after all, cheaper than the one per cent charged by the VAT Department, he said.
Ultimately, the government is determined to collect the arrears, with Mr Fenech saying that in due course defaulters could be sent judicial letters or warrants of seizure.
"VAT is rendering even better returns than expected and we're not just depending on the scheme to get back on track. But collecting the dues would make the VAT department work even more efficiently."