Failed Budget measure for gyms

PM tells aggrieved customer: ‘You are right’ about VAT

Most operators in the sector have used the VAT-reduction failure to boost their profits, the MCCAA found. Photo: Matthew Mirabelli

Most operators in the sector have used the VAT-reduction failure to boost their profits, the MCCAA found. Photo: Matthew Mirabelli

A VAT-reduction measure introduced in last year’s Budget to encourage participation in sports activities has not worked, and most of the operators in the sector have used it to boost their profits instead of encouraging more use of their facilities, the Times of Malta is informed.

Despite complaints by various gym-goers and sports enthusiasts, including to the Prime Minister, nothing has changed, and the Consumers Authority (MCCAA) has now told this newspaper that nothing can be done on the failed measure.

“I’ve been complaining for many months on end and even corresponded with the Prime Minister himself on this issue,” an aggrieved customer of a gym facility in Qawra told the Times of Malta.

“All of them, including the Prime Minster told me għandek raġun [you are right] but stopped there,” he complained.

Another consumer, a pensioner, said that when he complained to the MCCAA he was told directly that there was nothing that the authorities could do.

According to the Budget measure, which was announced in the 2016 estimates, starting in January of this year, sport facilities had their VAT rate slashed to just seven per cent instead of the standard 18 per cent. According to the Finance Minister’s Budget speech, this measure was intended “to encourage more sporting activity” and to help in the government’s fight against obesity.

However, according to an MCCAA probe, the majority of sports operators did not pass on the savings to the end user, the consumer, but kept the profit themselves.

“Following the 2016 Budget, the competition office reviewed the pricing of a sample of gyms across Malta, and it was found that while 40 per cent had reduced their prices, the vast majority had not,” a spokeswoman for the MCCAA told the Times of Malta when contacted on the recent complaints.

“Those that maintained their prices during 2016 can be considered to have increased their fees and that the VAT reduction was not passed on to their customers as originally intended with the budget measure,” she admitted.

Asked whether there was anything the authorities could do in the circumstances, the MCCAA spokeswoman said that there was not.

“Gym prices vary considerably, and price increases are not uncommon,” she said.

“In the circumstances, market dynamics can be considered to reflect a functioning competitive market and that users did not benefit from the budget initiative,” she admitted.

“We are disappointed, but the system does not provide for further remedies,” she said.

Last January, a few weeks after the introduction of the budget measure, Prime Minister Joseph Muscat publicly sounded a warning against unjust profiteering on this measure by businessmen.

He warned that the VAT reduction should be passed on to sportsmen and women, and should not be retained by gyms.

“This was something that the competition authorities would be looking into,” the Prime Minister said.

However, it seems that Dr Muscat’s warning went unnoticed and the authorities cannot do anything on the issue.

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