Ivan Camilleri, Brussels
Malta to opt out of proposed accounts directive
Malta has declared it has no intention of implementing a proposed EU directive aimed at reducing the administrative burden on small companies in drawing up their annual accounts.
The directive, still being discussed at Council and European Parliament level, is part of the EU's drive to cut red tape for small businesses. It gives member states the option of whether to implement it or not.
The proposed rule would amend the existing directive on the accounts of certain companies so they would no longer be required to present the accounts on an annual basis, trimming down administrative costs and increasing efficiency.
Implementing the directive would mean micro-companies across the EU each saving over €1,500 annually, according to a Commission study.
The exemption would apply to companies with a balance sheet total under €500,000, those with a net turnover of under €1 million and/or companies having an average of 10 employees during the financial year. This means the majority of Malta's companies stand to benefit from it.
Malta has however declared that, while it agreed with the aim of the proposed directive, it did not plan to grant the exemption as this could hit the country's tax base.
A government spokesman said that, although the proposal was deemed to be a positive one, it would not be beneficial to Malta given the prevailing situation.
"In Malta's view, it is important that it should be left to each member state to determine (an exemption) in view of the different realities existing in different economies.
"Should this proposal be adopted, Malta will not grant this exemption. Malta's financial reporting has already been simplified and, given the large number of micro-enterprises that made up the bulk of the economy, a blanket exemption of this type could affect the country's tax base negatively."
At the same time, the spokesman said Malta had already implemented new rules aimed at easing the accounting burden on small firms.
He said the government had long been committed to alleviating the burden related to accounting and auditing obligations of smaller companies.
According to the government, Malta's financial reporting has already been simplified with the recent enactment of the General Accounting Principles for Smaller Entities (GAPSE) by virtue of Legal Notice 51 of 2009.
"The rules cater for the needs of small businesses without compromising their quality of financial reporting," the spokesman said, adding this measure positively affected over 13,000 companies last year.
However, Malta's position is not in sync with the European Parliament's.
According to the EP's rapporteur on the matter, German Klaus-Heiner Lehne, member states such as Malta should not be allowed to opt out.
Presenting his report to the Legal Affairs Committee, Mr Lehne said it would be preferable for all micro-companies in all member states to benefit from the exemption.
He noted, however, that "the political situation in the Council does not make such an advance possible for now".
At present, all small EU companies are bound by the same rules as large enterprises and it is argued that accounting obligations do not correspond to their real needs, creating a disproportionate burden.
According to the Commission's impact assessment on the directive, if all member states exempted micro-companies without imposing additional requirements, the proposal could save them an estimated €6.3 billion annually.
The EP is expected to vote on the proposal later this month.
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Ludwig Flask
Feb 11th 2010, 21:27
"...Implementing the directive would mean micro-companies across the EU each saving over €1,500 annually, according to a Commission study..."
The company I work with would save about €4,000 yearly!
Whom is declaring of having no intention of implementing the proposed EU directive if approved?
MBorg
Feb 11th 2010, 19:44
" The exemption would apply to companies with a balance sheet total under €500,000 and with a net turnover of under €1 million and/or companies having an average of 10 employees during the financial year. "
If the Government thinks that the majority of Malta's companies fit this description and that Malta will lose tax if it had to follow this directive, how about implementing the proposed EU directive to dormant companies and to companies which have a low turnover. Why not to Vat Exempt companies with a turnover of + / - €14,000 ?
Although these companies have a low turnover as things stand, they still have to pay high fees to auditors. Doing away with the filing of annual reports will be of great help.
Joseph (Joe) Grima
Feb 11th 2010, 17:00
This iis the kind of story that could lead one to wallow in self pity. I am not sorry that I invited people to vote YES at the time of the referendum. On balance, I still think that being part of the EU should be beneficial. The pity is that we have this rubbish heap of an adminsitration that will act against the interests of the people even when the EU proposes in their favour. After having squandered billions of euros, this Government finds itself in dire financial straits and cannot afford to afford to alleviate the lot of SMEs working at year-end. Thousands of SMEs all over Malta and Gozo will be disadvantaged against their benefiting counterparts in Europe.This is a selfish Government optout that makes most of us question what on earth we are in the EU for. It is also a great pity that thousands of people like me had to face a choice between having Sant as their (Yuk!) Prime Minister, Gonzi or simply not voting. Whatever choice we made, led us from the proverbial frying pan into the fire. With a well-known disastrous PN track record, we should have seen this coming from afar.
lgalea
Feb 11th 2010, 15:24
A Spiteri The vast majority of SMEs are Limited Liability Companies whose capital and liability is limited to the share capital. So whatever the reasons, their creditors can only enforce an action to the registered share capital (all of which may not have been issued, i.e. the issued share capital may be less than the registered share capital in which case the shareholders will be liable to the rest which is yet unissued) and not a cent more. This means that you may be trading with a company and sell it products worth a million euros to a company with a share capital of euro 10,000, but if it defaults you and other creditors will fight for only 10,000 euros if it has enough assets or the remaining part of the share capital if it had not yet been issued.
Micro enterprises are normally family business and if they want to get a bank loan then they would have to meet the bank requirements. However, having to get accountants to have their papers certified etc would put more pressure on micro enterprises and SMEs which will make them less competitive especially in Malta.
Joseph Grech
Feb 11th 2010, 14:06
I see no point in repeating what others have said. My views coincide with those expressed by Jimmy Magro and John Agius.
I appeal fervently to the administration to deal with this issue with an open mind. Are we or are we not in the E.U.? Do we really wish to help SMEs? Very probably Malta NEEDS to mplement the directive! Could we know what the Opposition thinks about this issue please?
A Spiteri
Feb 11th 2010, 13:06
This is the position of UEAPME* on the proposed accounts directive:
“The suggestion to exempt micro enterprises from filing accounts is a questionable proposal. Annual accounts are a fundamental tool for small businesses and the only way to prove the financial solidity of an enterprise. Public authorities will still require those data for fiscal and statistical reasons. Banks will keep asking for financial information to check creditworthiness. Suppliers will want to know if the business they are dealing with is solvable and reliable in order to avoid the plague of late payments. All these data are now available and harmonised. If the obligation to file annual accounts disappears, so will this precious information. This issue was obviously not contemplated in the impact assessment study accompanying this proposal, which is mainly based on hypothetical savings and does not consider the bigger picture.”
* UEAPME is the employers’ organisation representing exclusively crafts, trades and SMEs from the EU and accession countries at European level. UEAPME has 83 member organisations covering over 12 million enterprises with 55 million employees.
(http://www.ueapme.com/IMG/pdf/090226_pr_accounting.pdf)
John Agius
Feb 11th 2010, 12:04
How are Maltese SMEs to compete with their foreign counterparts if government does its best to keep their heads under water?
This is a case of either government failure in that govt. does not have the ability to audit trail along the different sectors of the economy or the work of the tightly-knit accounting professionals' body or a little bit of both.
In either case, it is government that is doing this disservice to local businesses and their potential employees. If it is uncapable it is very obviously its fault. If it gives in to professional lobbies it is again its fault.
Jimmy Magro
Feb 11th 2010, 11:36
The opting our will create unfair competition and thus defeating the whole concept of the European Union. Maltese registered companies would still need to spend amounts of euros to comply with the current legislation whereas companies adopting the new measure will be saving these expenses.
I wonder what the Chamber of Commerce and Industry and the GRTU have to say on this matter.
At least the Government should issue a directive to exempt dormant companies (of which there are thosands) from filing annual accounts and annual return unless there are any changes in directors/shareholders and/or shareholding.
I would also state that there are other measures and controls that can be introduced to safeguard tax revenue such as the notorious input-output tables mentioed when VAT was first introduced.
lgalea
Feb 11th 2010, 10:09
So much for the Government's commitment to help Maltese companies especially SME's
Dave Alan Caruana
Feb 11th 2010, 10:01
of course if you're trying to work in Malta, you always draw the shortest stick!