Bodies that represent business have complained about the “preferential treatment” being given to political parties by the tax authorities.

The Malta Employers’ Association and the Chamber for Small and Medium Enterprises said they expected the country’s leaders to lead by example.

They were reacting to a report in Times of Malta that the tax authorities were chasing the Labour Party and the Nationalist Party’s media companies over some €5 million in unpaid VAT.

The PL’s ONE and the PN’s Media.Link both recently received formal notices from tax officials after repeatedly failing to honour deals to settle years of unpaid VAT.

According to agreements signed between 2014 and 2015, both were expected to make monthly repayments of more than €20,000 but have regularly defaulted on their payments.

MEA director general Joe Farrugia said it was “a well-known secret” that the political parties’ business model is unsustainable.

“They set a bad example for tax compliance and it is obvious that businesses feel there is a case of two weights and two measures when it comes to giving what is due to the exchequer,” Farrugia said.

“Tax evasion can never be justified, even if some, including the political parties, seem to benefit from preferential treatment by the tax authorities,” he added.

What was sorely needed, Farrugia said, was a revision in the way political parties were financed.

“As things stand today, political parties are dependent on ‘donations’ from individuals and businesses as it is evident that revenue from party membership and ancillary activities are insufficient to guarantee them the required income for them to operate as they are,” he said.

Obvious that businesses feel there is a case of two weights and two measures

“This situation is made worse since they also run television stations.

“Such dependency on donations is one reason why there has been a dangerous collusion between business and politics, with matters deteriorating to the extent that Malta has ended up being greylisted by the FATF,” he added. 

He said the parties should be partially state funded so that corporate donations and even door-to-door collections could be prohibited.

“This is the only way in which political parties can gain credibility with the thinking public,” he noted.

“We have asked for such a discussion to be undertaken at the Malta Council for Economic and Social Development  but nothing has materialised so far.

“Transparency in party financing will be a positive step towards establishing a tax compliance culture in Malta,” Farrugia said.

The chief executive of the Chamber of SMEs, Abigail Mamo, said that the collection of tax and VAT needs to be implemented across the board “from the top downwards”.

“We expected the political parties, state owned companies and the known big players to set the example. We said very clearly that setting an example with small businesses would not be acceptable. Using SMEs to tick the FATF boxes would not be acceptable,” she said.

“[The story] shows clearly that when the political parties say that businesses need to be more compliant, it is clear that they need to take a hard look at themselves first and foremost.

“If the global players are asking for a culture shift in Malta, the political parties are an inherent part of this change. They are the ones that need to set the tone.

“It is very important that any entity is treated equally in this process.”