What was negotiated on self-employed?

This issue falls under the area known as "Free movement of services". EU law states that EU citizens have the right to establish themselves in any member state and offer their services there. This covers the right of individuals to establish themselves in another country on a self-employed basis, whether in a profession, trade or other business.

Malta did not request any special arrangement to control the right of establishment of self-employed from other EU countries. In its negotiating position paper (which is a publicly available document), Malta said that it "will ensure that on accession the freedom of establishment and the freedom to provide services will apply equally to Maltese and EU natural or legal persons".

Negotiations on this area were closed in June 2001. The outcome of negotiations in this area is also available to the public.

As a result, upon membership, any Maltese company or individual may set up business in any EU country. Inversely, any EU citizen will have the right to set up a business in Malta. This does not apply to traders from non-EU countries where current restrictions will continue to apply.

Malta's negotiating position in this area is different from the position on free movement of workers where Malta negotiated a transitional period of seven years during which it can refuse the work permits of EU citizens seeking employment in Malta. Malta also negotiated a further safeguard that applies permanently after this seven-year period.

There are reasons why a difference was made between employed workers and self-employed individuals.

First of all, it is known that the actual movement of self-employed within the EU is even more limited than that of workers. In Malta, it is also known that the local market is small and rather saturated. This gives less incentive for foreign self-employed to set themselves up permanently in our country. For obvious reasons of size, there is more incentive for business to use Malta as a base for export to the EU market, than to penetrate the Maltese market alone. After membership, Malta will shed the last remaining obstacles that still limit our access to the EU market.

But there is more to it than that. Unlike employed individuals, self-employed are subject to additional national rules relating to setting up and operation of business. This makes setting up for a self-employed individual not as straightforward as the exercise of the right to seek employment.

Self-employed individuals must register in the country where they choose to set up shop and disclose the nature of their business. They must also register for VAT, income tax and social security. In the case of self-employed who exercise a trade or profession, they must also go through the process of recognition of their qualifications before offering their service here.

If their trade or profession is not regulated in Malta but regulated in their country, they must obtain recognition with the Malta Professional and Vocational Qualifications Awards Council, which deals with the recognition and award of vocational qualifications based on knowledge, skill or competence.

An additional system of regulation is the trade licence since all businesses, whether Maltese or foreign, whether self-employed or not, require a trade licence in order to operate.

Although, in principle, this is an open system, there are exceptional cases where trade licences are subject to a numerus clausus, that is, limited by number. It is up to the national government to determine in which cases a numerus clausus should apply. However, if it is decided to issue new licences, then there can be no discrimination between Maltese and other EU citizens in awarding them.

In Malta, we already limit the number of certain businesses, such as pharmacies. This can continue even if we join the EU, if it is considered necessary to do so. We also limit the number of taxi-drivers, minibus drivers, bus-drivers, funeral hearses and other activities linked to transport.

In all these areas, although the right of EU self-employed individuals will not, in principle, be restricted as a result of negotiations, in practice it will still be restricted because the restriction applies for both Maltese as well as for EU self-employed individuals.

Certain licences can be linked to certain other arrangements. For instance, trading licences for hawkers (tal-monti) can be linked to a specific site in a specific village. This practice is already starting to be used in Malta and it limits the number of hawkers in any given market (suq). It also means that no new hawkers, whether Maltese or foreign, can set up unless they have a reserved space that is licensed to them. This mechanism too is possible even after membership.

One problem that remains is illegal trading, whether by Maltese or even by foreign traders which, as we know, already exists and thrives in the black market economy. Illegal trading is a major concern for legal traders who abide by the law only to find that they are outpriced by illegal traders who evade VAT, social security and all the works.

This concern is supposed to be addressed under the new law on trade licences which will bring about increased policing in order to combat illegal trading both by Maltese individuals but also by foreigners. This system works to the advantage of those self-employed who play by the rules. And by weeding out illegal activity, it puts legal traders in a better competitive position.

Malta-EU Information Centre: Tel: 25909192; Fax: 227580; E-mail address: euinfo.mic@magnet.mt; Website: www.mic.org.mt

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