With Maltese adults and children ranking among the most obese or overweight in Europe, any incentive to persuade people to change their lifestyle and dedicate more time to exercise is most welcome. In last year’s Budget, the government announced a reduction from 18 per cent to seven per cent in VAT on fees charged for gym and other sports facilities fees. The idea, of course, was to encourage more people to do physical exercise.
This measure, however, seems to have failed to bring about the full benefit to gym-goers and other sports enthusiasts. A spokeswoman for the consumers’ watchdog told this newspaper that “while 40 per cent of sports facilities operators reduced their prices, the vast majority had not”. No wonder, many users of gyms and other sports outlets felt short-changed by the owners of these facilities.
When businessmen resort to profiteering even though fiscal incentives are given to people to encourage them to lead a healthier lifestyle, they will be sowing the seed of discontent that will alienate their own customers and make the tax authorities more rigid in their approach to fiscal incentives in the future.
The success of the lower VAT measure always depended on the goodwill of all concerned to make it work.
The tax authorities did their part by reducing the VAT rate and, presumably, many people were motivated to start using sports facilities thinking it would be more affordable to do so.
When the reduction in the overall cost of using sports facilities did not materialise because some operators pocketed the VAT savings rather than passing them on to their clients, some resorted to the consumers’s watchdog that understandably could not do much to persuade operators to treat their customers more fairly. One disappointing reality we keep experiencing is that, in a small market, the dynamics of competition do not always deliver the full benefits to consumers. Some gym and sports facilities owners may have a dominant position in the market that they shrewdly exploit by overcharging, even when their costs are reduced through a VAT rebate on the fees they charge to clients.
But to expect the competition authorities to police the system by imposing price controls and enforcement on different sports facilities operators is not realistic or even desirable. Adding a layer of bureaucracy, even if the intention is to protect consumers, will ultimately fail to protect the interests of sports facilities users.
Perhaps more realistically, fiscal and other incentives should be given for new sports facilities operators to set up new businesses so that the dynamics of competition will work in favour of consumers in this sector. Lack of seed capital as well as scarce availability of affordable locations where new sports facilities can be set up to increase competition are stumbling blocks that discourage some entrepreneurs from venturing in the sports facilities sector.
The model used by the government to encourage football clubs to enhance their sports facilities could be extended to other organisations of sports lovers. Rather than complain passively about the selfish attitude of some sports facilities operators, public-spirited people who love physical exercise can form pressure groups to facilitate the setting up of new facilities where club members can have a say in the running of the facilities.
Operators of sports facilities will be very short-sighted indeed if they think they can take their customers for granted. Those who like to engage actively in different sports will, ultimately, find ways of getting a fair deal in a competitive market.