Businesses that do not pay their taxes should be disqualified from public procurement offers, the Malta Chamber has said, flagging “serious” issues in current processes.

The business lobby’s call comes two days after Finance Minister Clyde Caruana publicly chastised business owners who did not settle their tax bills, warning them that “government is not an overdraft facility”.

The chamber said it welcomed Caruana’s statements and noted that tax compliant businesses were also disadvantaged by competitors that did not pay their taxes, as they “distort the playing field”.

But the government had to follow through with tangible action, it noted.

"The Malta Chamber continues to see disturbing reports of operators being awarded multimillion public contracts when it is publicly known that they are in arrears on tax also to the tune of millions,” it added.

“Taxes are part of costs, and those who do not pay them are effectively reducing their operating costs... When such businesses are actually awarded tenders, all the country is doing is supporting the long-term growth of tax-defaulting businesses,” it warned.

The chamber is not alone in flagging serious problems with public procurement: a  National Audit Office report published in December 2021 noted the overuse of direct orders by some government entities, in violation of public procurement rules, with some entities bypassing rules by “deliberately splitting orders into lots of under €10,000”.

The chamber argued that businesses that fell behind on their tax payments should be penalised when applying for public contractors, while major defaulters should be disqualified from public procurement altogether.

In his parliamentary speech, the finance minister noted that the government was owed around  €5 billion in tax arrears.

The chamber noted that statistics suggested that tax collection efficiency had actually declined during the economic boom years – while GDP rose by 35%, accumulated tax arrears skyrocketed by 75%.

It cited a National Audit Office report, saying “gross outstanding tax arrears more than doubled between 2016 and 2020, going from just under €3 billion to €6.3 billion”.

The chamber noted that it had highlighted several concerns with public procurement – as well as recommendations to address them – in a report it published last year in collaboration with Ganado Advocates.

However, while government officials had acknowledged problems during subsequent consultation meetings, the chamber said it sensed a lack of urgency in fixing these problems.

“The speed of implementing the required actions is not reflecting the urgency of addressing the serious existing issues in public procurement,” it said.