No payment, no taxes, medicine importers tell government

It is invoices yet to be settled by the government and not cheques that medicine importers are attaching to their VAT returns.

Reginald Fava, who represents the importers at the Chamber of Commerce and Enterprise, said some have also attached a note explaining they are unable to settle the tax bill because they were cash-starved by the government's late payment for the medicine it buys from them.

The importers hope the 12 per cent penalty for late payment of VAT will be waived.

The action was taken on the personal initiative of the importers and Mr Fava could not say how many of them were involved.

The move comes after leaders of pharmaceutical importers warned last week that they may have to stop getting essential medicines if the government failed to pay them for the goods they have already supplied.

The importers, who say they are owed a €25 - €30 million, warned that if the situation persists they were considering lay-offs or even winding up their companies.

Alternattiva Demokratika chairman Arnold Cassola had suggested that the government should offset its dues with VAT and other taxes owed by the importers to alleviate the crunch. The importers appear to have taken to the proposal particularly well.

When asked what it plans to do, the Finance Ministry said the government will be honouring its commitment to pay the importers. Asked when, a spokesman said there was no timeline.

Social Policy Minister John Dalli was a little more forthcoming, saying that the funds allocated for the purchase of medicine had run out but will be replenished in January.

He said the government is looking into solutions to this problem by pursuing a reform in the way medicines are bought, adding that he would soon meet the Director of Contracts to find a way forward.

Mr Dalli said he was worried about the matter, adding: "We will not leave people without medicines".

Still, Mr Fava said there had been no feedback from the government since the matter was made public last week. "Not even a sound".

The issue over medicine payments is not new and has been something of a chronic problem over the past few years. Back in 2005, the Chamber was forced to accept an agreement with the government under which money owed to its members would be paid within 150 days, gradually to be reduced to 90 days. In return, they were made to waive interest on such late payment and the government waived penalties for late consignments.

Mr Fava said that, while the importers had kept their end of the bargain, the government had still charged them for late penalties throughout the years and was not even respecting the 150-day deadline.

He said that in a recent meeting the director of health had offered to implement the 2005 agreement in January 2009 but the Chamber refused.

"It is unacceptable. The importers' main client is the government. We cannot stop importation because we feel we have a moral obligation towards the client. But if our members cannot afford to pay the international supplier in advance, the supplier will simply not ship the order," Mr Fava noted.

Suppliers give pharmaceutical importers a maximum of 60 to 90 days to settle their accounts but, given the prevailing financial crisis, some were insisting on cash in advance, even before the goods were shipped to Malta.

Last week, the importers had mentioned the possibility of taking the matter up with EU institutions once the government was acting in breach of the EU payments directive. Asked how close they are to doing so, Mr Fava said they were as close as the government was close to paying them for the medicines they delivered.