All major soft drink brands have been affected by the growing illicit trading in beverages, Norman Aquilina, chief commercial officer of Simonds Farsons Cisk told The Times Business, not just Farsons brands. "There are also volumes of branded and generic water being traded through such illicit means," he said. Mr Aquilina also said that this illicit trade of beverages is "steadily growing".
Last week Farsons' chief executive officer Louis Farrugia highlighted the problem of beverages being imported and placed on the local market without VAT and the eco-contribution being paid, during the company's annual general meeting.
The two main Farsons soft drinks brands affected by this "rogue trading" are Pepsi and 7-Up.
The Times Business contacted the General Soft Drinks Co Ltd, bottlers of Coca-Cola and Sprite, among other soft drinks, to ask the company how it has been affected by the illicit trading of beverages but was informed that both the managing director, Brian Mizzi, and the general manager, Maria Micallef, were out of the office and would not be back until mid-July. Sources close to the beverages industry, however, have told The Times Business that Coca-Cola has been affected by this "rogue trading".
Mr Aquilina said that the dismantling of customs border controls within the European Single Market should have been superseded by increased market surveillance in the Maltese market "ensuring that all fiscal and regulatory obligations are adhered to". He said: "This shift towards market surveillance has not really occurred and as a result we do not have a level playing field. This is causing a significant amount of damage to legitimate businesses which are being unfairly disadvantaged as a result of their compliance with the prevailing obligations.
"There is no doubt that ensuring a level playing field for all, within a fully liberalised and growingly competitive market, is critical for business. Indeed, its present absence is the very basis of a number of concerns."
Mr Aquilina said one should not dispute the benefits that Malta gained following its entry into the Single European Market, "but we need to make sure that we do not let anyone misinterpret, or abuse from the true intentions and significance of the freedom of movement of goods. Such a freedom does not dismiss us from our obligations to respect, and the authorities to enforce, the rule of law."
He added: "We should not tolerate a situation whereby some seek to attain and maintain a competitive edge over legitimate operations by using illicit means, evading their fiscal obligations and circumventing other laws and regulations."
Mr Aquilina said that Farsons has brought up the problem of the illicit trading of beverages with both the government and the Chamber of Commerce and Enterprise. "It is clear that what we are raising are concerns of legitimate versus illegitimate business, and not that of one single company," he said.
The Malta Chamber of Commerce and Enterprise, in fact, is supporting Farsons in its call for increased market surveillance. In a statement, the Chamber, which said that it had already made strong representations on the issue over the past years, said it appeals to the authorities to "coordinate and put their act together without further delay so as to ensure that investment and jobs in the affected sectors are no longer unfairly compromised."
"As a member of the European Union, Malta is no longer allowed to perform border controls of merchandise entering the country from the Single Market. It must now rely on market surveillance. But the set-up and resources within the public service have not been adequately transferred to an entity with executive powers which are compatible with the regulations of the European Single Market.
"Ever since Malta's EU accession, the country has been prone to abuse which is detrimental to the bone-fide trader and the consumer alike.
Traders and consumers have thus far relied on the initiative of a handful of proactive people within the public service, most notably in the Ministry of Finance.
The setting up of a dedicated authority to perform effective, structured and organised market surveillance is now long overdue.
Effective market surveillance is truly a means towards ensuring consumer protection, fiscal justice and a fair business environment," the Chamber said.
The main concern over the illicit trading of beverages is that goods are being brought in via roll-on/roll off vessels exempt from VAT from the "exporting" country and being "imported" into Malta and sold without any VAT (18 per cent) or eco contribution (€0.02 per carbonated soft drink or water package). Since soft drinks and water are low value items, the impact or absence of the eco contribution and VAT is significant in relation to the total cost - placing illicit traders at a material price advantage.
Last week Farsons' chief executive officer Louis Farrugia highlighted the problem of beverages being imported and placed on the local market without VAT and the eco-contribution being paid, during the company's annual general meeting.
The two main Farsons soft drinks brands affected by this "rogue trading" are Pepsi and 7-Up.
The Times Business contacted the General Soft Drinks Co Ltd, bottlers of Coca-Cola and Sprite, among other soft drinks, to ask the company how it has been affected by the illicit trading of beverages but was informed that both the managing director, Brian Mizzi, and the general manager, Maria Micallef, were out of the office and would not be back until mid-July. Sources close to the beverages industry, however, have told The Times Business that Coca-Cola has been affected by this "rogue trading".
Mr Aquilina said that the dismantling of customs border controls within the European Single Market should have been superseded by increased market surveillance in the Maltese market "ensuring that all fiscal and regulatory obligations are adhered to". He said: "This shift towards market surveillance has not really occurred and as a result we do not have a level playing field. This is causing a significant amount of damage to legitimate businesses which are being unfairly disadvantaged as a result of their compliance with the prevailing obligations.
"There is no doubt that ensuring a level playing field for all, within a fully liberalised and growingly competitive market, is critical for business. Indeed, its present absence is the very basis of a number of concerns."
Mr Aquilina said one should not dispute the benefits that Malta gained following its entry into the Single European Market, "but we need to make sure that we do not let anyone misinterpret, or abuse from the true intentions and significance of the freedom of movement of goods. Such a freedom does not dismiss us from our obligations to respect, and the authorities to enforce, the rule of law."
He added: "We should not tolerate a situation whereby some seek to attain and maintain a competitive edge over legitimate operations by using illicit means, evading their fiscal obligations and circumventing other laws and regulations."
Mr Aquilina said that Farsons has brought up the problem of the illicit trading of beverages with both the government and the Chamber of Commerce and Enterprise. "It is clear that what we are raising are concerns of legitimate versus illegitimate business, and not that of one single company," he said.
The Malta Chamber of Commerce and Enterprise, in fact, is supporting Farsons in its call for increased market surveillance. In a statement, the Chamber, which said that it had already made strong representations on the issue over the past years, said it appeals to the authorities to "coordinate and put their act together without further delay so as to ensure that investment and jobs in the affected sectors are no longer unfairly compromised."
"As a member of the European Union, Malta is no longer allowed to perform border controls of merchandise entering the country from the Single Market. It must now rely on market surveillance. But the set-up and resources within the public service have not been adequately transferred to an entity with executive powers which are compatible with the regulations of the European Single Market.
"Ever since Malta's EU accession, the country has been prone to abuse which is detrimental to the bone-fide trader and the consumer alike.
Traders and consumers have thus far relied on the initiative of a handful of proactive people within the public service, most notably in the Ministry of Finance.
The setting up of a dedicated authority to perform effective, structured and organised market surveillance is now long overdue.
Effective market surveillance is truly a means towards ensuring consumer protection, fiscal justice and a fair business environment," the Chamber said.
The main concern over the illicit trading of beverages is that goods are being brought in via roll-on/roll off vessels exempt from VAT from the "exporting" country and being "imported" into Malta and sold without any VAT (18 per cent) or eco contribution (€0.02 per carbonated soft drink or water package). Since soft drinks and water are low value items, the impact or absence of the eco contribution and VAT is significant in relation to the total cost - placing illicit traders at a material price advantage.