Government payments will have to be timely following the adoption of the Late Payments Directive on August 14, according to Small Business Minister Jason Azzopardi, as business groups hope the Legal Notice which transposed the directive into the Commercial Code will be effectively enforced to alleviate liquidity problems.
Certain ambiguous definitions may give rise to undesirable consequences
“Of course, government payments will have to come up to speed,” Dr Azzopardi told The Times Business. “What is sauce for the goose is sauce for the gander.”
The Malta Chamber of Commerce, Enterprise and Industry and the Malta Employers Association welcomed the measure, implemented several months before the March 2013 deadline set by European authorities.
Dr Azzopardi said Malta had heeded the call by European Commissioner for Industry Antonio Tajani for member states to strive to implement the directive as soon as possible.
“Things are in place for the directive to be observed. That shows that Malta is more than able to undertake its EU obligations,” Dr Azzopardi added.
The provisions of the directive apply to commercial transactions between businesses, or between businesses and public authorities. It does not harmonise payment periods but creates a statutory right to interest 30 days after the date of the invoice, unless another payment period has been negotiated in the contract.
“It is hoped that the Legal Notice can be implemented effectively to make a meaningful difference to the business community, especially where transactions with government and public entities are concerned,” the Malta Chamber told The Times Business yesterday.
The Chamber said that on paper, the payment terms between the government and the private sector seem to have been reduced to 30 days, with the possibility of increasing to 60 days in certain cases, including those involving health care.
It insisted that the success of this regulation lay in efficient implementation, especially in terms of the starting date for the payment period in cases where the product delivered has to be verified or ascertained.
“Certain ambiguous definitions have been noted which we fear may give rise to undesirable consequences,” the Malta Chamber warned. “These relate to loose definitions of unfair practices or provisions, in the case of a dispute. We are, however, pleased that our views on business-to-business transactions were taken into consideration.
“The Legal Notice provides for flexibility where these transactions are concerned, and it makes no attempt to over-ride any agreement between two private parties as previous drafts of the directive had aimed to do.”
The Malta Employers Association hoped the directive would go some way to helping businesses creaking under the strain of cash flow shortages to get back on their feet.
“One of the chronic diseases which affect many Maltese businesses is the lack of liquidity. A good percentage of businesses, particularly business-to-business operations, which close down end up doing so because of cash flow issues rather than lack of custom,” MEA director-general Joe Farrugia said.
The government is a major customer for many businesses, and it should lead by example – many companies are cornered when the government falls behind on payments, Mr Farrugia stressed.
The price for that is usually interest on overdrafts, fines, and even loss of business.