The parliamentary secretary within the Ministry of Finance has called for better enforcement by the Malta Financial Services Authority on defaulters who do file their company accounts late - or not at all.
While some fines - such as those for late submissions- are levied in full, in many cases only 1 per cent of the applicable daily fine is levied. The fees and fines were drawn up in 2003 with a five-year moratorium on any changes. However, their enforcement is at the discretion of the MFSA.
The penalty as currently imposed for a one-year delay in the submission of accounts in respect of a particular financial reference period amounts to Lm83. But since penalties are applied on a daily basis in respect of every financial reference period until the accounts are submitted, the cumulative amount in practice increases to several hundred and often thousands of liri if accounts are repeatedly not submitted for a number of years.
"It seems that companies are quite happy to pay the fines rather than to disclose their financial information. Clearly this is an area where we need to enforce much better. The legal obligation is there. It is very important to have much more discipline when it comes to filing returns. Obviously, they are available as companies prepare them for fiscal purposes. But the accounts filed with the Inland Revenue Department are not in the public domain. This is something that the MFSA needs to look into."
Mr Fenech said at the launch of proposed reporting standards for SMEs (see story on page 3) that adequate financial statements are required by an array of users, such as creditors, providers of finance, fiscal revenue authorities and other users who are not in a position to demand reports tailored to meet their particular information needs.
"This is why it is in the public interest for there to be compliance. We clearly need much more enforcement," he told The Times Business.
The MFSA has been treading carefully and pragmatically. Sources said that fines were imposed as far as possible without actually threatening the survival of the business. However, it is gradually tightening up its enforcement, aided by the fact that the system is now fully automated. "We used to collect Lm200,000 a year in fines before the system was made electronic. Now we collect Lm500,000 a year. This is not something to celebrate. It is a black mark for Malta as it shows that there is not an acceptable level of corporate governance.
"At first, the MFSA found that many of the companies that did not file accounts had not been trading for years. But once the system was cleared of all these cases, the MFSA did start to clamp down."
Next year, the MFSA will start a consultation process prior to establishing the new fees and fines that will come into effect by the end of 2008.
"We are looking at whether we should lower the minimum threshold and raise the maximum one - but before we do that we have to analyse the impact this would have," the sources said.
While some fines - such as those for late submissions- are levied in full, in many cases only 1 per cent of the applicable daily fine is levied. The fees and fines were drawn up in 2003 with a five-year moratorium on any changes. However, their enforcement is at the discretion of the MFSA.
The penalty as currently imposed for a one-year delay in the submission of accounts in respect of a particular financial reference period amounts to Lm83. But since penalties are applied on a daily basis in respect of every financial reference period until the accounts are submitted, the cumulative amount in practice increases to several hundred and often thousands of liri if accounts are repeatedly not submitted for a number of years.
"It seems that companies are quite happy to pay the fines rather than to disclose their financial information. Clearly this is an area where we need to enforce much better. The legal obligation is there. It is very important to have much more discipline when it comes to filing returns. Obviously, they are available as companies prepare them for fiscal purposes. But the accounts filed with the Inland Revenue Department are not in the public domain. This is something that the MFSA needs to look into."
Mr Fenech said at the launch of proposed reporting standards for SMEs (see story on page 3) that adequate financial statements are required by an array of users, such as creditors, providers of finance, fiscal revenue authorities and other users who are not in a position to demand reports tailored to meet their particular information needs.
"This is why it is in the public interest for there to be compliance. We clearly need much more enforcement," he told The Times Business.
The MFSA has been treading carefully and pragmatically. Sources said that fines were imposed as far as possible without actually threatening the survival of the business. However, it is gradually tightening up its enforcement, aided by the fact that the system is now fully automated. "We used to collect Lm200,000 a year in fines before the system was made electronic. Now we collect Lm500,000 a year. This is not something to celebrate. It is a black mark for Malta as it shows that there is not an acceptable level of corporate governance.
"At first, the MFSA found that many of the companies that did not file accounts had not been trading for years. But once the system was cleared of all these cases, the MFSA did start to clamp down."
Next year, the MFSA will start a consultation process prior to establishing the new fees and fines that will come into effect by the end of 2008.
"We are looking at whether we should lower the minimum threshold and raise the maximum one - but before we do that we have to analyse the impact this would have," the sources said.