Government urged to settle issue before European court ruling

The government may be forced to refund the departure taxes paid by passengers since May 2004 if European Commission action in the European Court is successful.

MEP Simon Busuttil, who was the first to question the legality of the departure tax in its existing format, told The Times there was good reason for Malta to settle this issue before the court delivers its judgement.

The Commission, on Wednesday, decided to reject the arguments by the government in response to two legal warnings that the tax is discriminatory and in breach of EU law. The Commission is evidently still unsatisfied with the government's decision to slash the tax from Lm20 to Lm10. It is not clear what line of action the government intends to take. When contacted, Parliamentary Secretary Tonio Fenech said he did not have any comment to make at this stage.

Since the Commission intends filing the case in the European Court of Justice in the coming weeks, the government might be forced to eliminate the tax or come out with an alternative levy before it presents the budget for 2008.

Dr Busuttil said the European Court will only express itself on whether, in its current form, the Maltese departure tax is in line with EU law.

"But, yes, there is a long history of jurisprudence in favour of people who claimed back tax collected in breach of EU law," the MEP warned.

It is an established principle of EU law - well-developed in various judgments of the European Court of Justice - that any tax collected in breach of EU law must be paid back to taxpayers.

As explained in one judgement: "The court has consistently held that individuals are entitled to obtain repayment of charges (tax) levied in a member state in breach of Community provisions".

When the tax on satellite dishes was repealed two years ago, all those who had paid it with effect from May 2004 were given a refund.

At this stage, the government should assess whether it is worth fighting the issue in court, Dr Busuttil said.

"My view is that Malta would lose this case. And let us not forget that the Commission does not precipitate matters to court - it has taken it two years to get here. But then this also explains why, more often than not, the Commission wins these cases."

If Malta wants to settle the matter it must act now by either removing the discriminatory element in the departure tax or eliminating it altogether, he said.

Don't other EU states have a departure tax?

"Yes, many do. But none of them, it seems, apply it in a discriminatory manner like Malta where only Maltese residents pay it," Dr Busuttil said.

The Commission's decision is a sweet victory for the Federated Association of Travel and Tourism Agents, which had lodged a protest with the EU on the matter.

FATTA president Ian Tonna said the government could have spared itself the embarrassment had it heeded the association's laments.

Pointing out that the hefty tax served to dissuade many families from travelling over the years, he urged the government to eliminate at once the present Lm10 departure tax unless it wanted to risk refunding millions of liri to travellers and creating an administrative nightmare.