The future of the Pharmacy of Your Choice scheme is “in jeopardy” because pharmacy owners are feeling short-changed on a tax-cut deal that came with the system.
However, Finance Minister Tonio Fenech has flatly ruled out giving any bigger reduction to the pharmacies involved in the scheme.
The Chamber for Small and Medium Enterprises (GRTU) is irked that instead of a tax credit amounting to 200 per cent of the expense that pharmacies forked out to become part of the scheme, they were now being told to deduct the amount from their tax due – a technical nuance that makes a huge financial difference.
According to the organisation’s director-general Vince Farrugia, the method being used by the government does not even cover the full amount pharmacy-owners invested let alone the 200 per cent promised in the Memorandum of Understanding signed by the GRTU and the Finance Ministry in July 2007.
In a nutshell, he said, if a pharmacy spent €7,000 in stock and infrastructure to be able to distribute state-sponsored medicines, it would only get back just over €5,500, while with the tax credit on the same expense the pharmacy would end up with a €2,000 surplus.
Mr Farrugia said the situation put the future of the POYC scheme “in jeopardy”, especially the planned roll-out to Birkirkara, Malta’s largest locality.
“As things stand today the POYC scheme is in jeopardy. The GRTU is being forced to issue directives which will stall the roll-out of the scheme, of which the GRTU is the main backer, to other localities,” Mr Farrugia said.
“This is yet another case where the GRTU enters into agreements in good faith with the government and then someone realises that this agreement is not good for the government and decides to unilaterally force a change. The GRTU does not want to issue directives to pharmacies participating in the scheme although it is under extreme pressure to do so by its members,” he said.
He said the problem revolved around four words: “tax credit” and “tax deduction”. The former is what he says was promised in the MoU while the latter is the interpretation being given by the Inland Revenue Department.
He said that in the agreement, the wording is clear: “Government will implement a Tax Credit Scheme of up to 200% of the actual expenditure on software and equipment necessary for the implementation of the POYC subject to a maximum capital expenditure of Lm3000 (€7,000).” After the agreement was signed, negotiations were held and the amount was capped at €9,000.
He said several attempts to solve the problem through the Finance Minister had proved unsuccessful “as the minister considers this case closed”.
Mr Fenech denied the agreement was on a tax credit. He told The Times: “If we were to give a tax credit we wouldn’t have given a credit of 200 per cent. If you look at our tax credit schemes, they never work on a 200 per cent basis.”
Rather, for the past four years, the minister said, the system “has always worked with a tax deduction scheme”, insisting that the current scheme was already “very generous”.
“What they’re asking is not for two euro where there was one, but for six euro for one. If the GRTU is saying that the POYC is jeopardised, we will carry out a whole review of the system but then we’ll have to put in question the fees paid by the government for the POYC, so we’ll see how true it is that these are losing money from the POYC. I don’t think money’s being lost because whoever is in the scheme did not give us that feedback.
“It is understandable that (a representative body like GRTU) would want more but the country can’t give them more, full stop,” said the Minister.