Malta’s two political party media companies owe more than €5 million between them in unpaid VAT and have been warned to start to honour agreements to settle their dues.

The Labour Party’s ONE and the Nationalist Party’s Media.Link recently both received a formal notice from tax officials after repeatedly failing to honour agreements to settle years of unpaid VAT. 

Times of Malta understands that the two media companies also have other agreements to cover unpaid income tax and social security contributions which amount to millions of euros, including hefty fines. 

According to the agreements signed between 2014 and 2015, both ONE and Media.Link were expected to make monthly repayments in excess of €20,000 over and above interest on the amounts due to bring their affairs in order.  However, despite repeated warnings, the two companies, which air partisan political content across an empire of TV, radio and social media, have been regularly defaulting on the payments to cover their VAT agreements. 

Sources privy to the financial situation in the two companies said it was practically impossible to honour the repayment plans, spread over 15 years, as the dues that had been left to accumulate over the years were now simply too heavy.

'Court, possible liquidation'

If the authorities were to call in the full amounts owed, a source in one of the two parties said the media company would likely end up in court and “possibly liquidation”. 

“We just don’t have that kind of money,” said the source who works in the administration of one of the media companies.

Internally discussed the possibility of requesting some sort of public bailout

Another party source said they had internally discussed the possibility of requesting some sort of public bailout, however, this was shot down before the proposal was even formalised. 

Both companies seldom file audited accounts, making it difficult to get a realistic picture of their financial situation. 

Meanwhile, the office of the Inland Revenue Commissioner did not respond to questions sent about how the two companies had been allowed to accumulate such heavy debts and why no concrete action had been taken to remedy the situation.

Asked for a breakdown of the dues, the taxman cited confidentiality and secrecy rules prohibiting him for divulging what was owed. He did not comment on whether the matter had been passed on to the police for criminal action.

'Media.Link entering sustainable repayment agreement'

Replying to questions, a PN spokesperson said Media.Link is in the process of entering into a “sustainable” repayment agreement with the VAT Department for outstanding dues, “much of which has been outstanding for a long time”.

“However, Media.Link is fully aware that these arrears are owed and as per all its obligations is committed to paying them in full as soon as possible,” the spokesman said. 

Media.Link says it is up to date with its income tax and social security repayment plans after these too had been left unpaid in the past.

The PN spokesperson said the COVID-19 pandemic was partly to blame.

“Like other businesses, the last two years have been extremely difficult financially for Media.Link and there are issues over VAT payments,” the spokesman said. 

'ONE to honour obligations'

ONE chairman Jason Micallef said that like other commercial entities, his organisation will not entertain questions that are of a commercial nature.

“I can assure you that ONE remains committed to honouring its obligations according to law,” he said.

Lax enforcement of tax rules was singled out as one of the main reasons Malta was recently placed on a list of countries that are not doing enough to combat international financial crime. 

The Financial Action Task Force in June placed on the so-called grey list of untrustworthy financial jurisdictions, with the global watchdog saying failure to crackdown on tax abusers was a leading concern. 

Shortly after being greylisted, Malta signed up to a plan to improve its anti-money laundering regime and national experts are drawing up reforms in a bid to restore the country’s reputation.

Prime Minister Robert Abela was quick to call on the public to help the authorities clamp down on tax dodgers, saying the authorities needed help to weed out abusers.

Opposition leader Bernard Grech said only a Nationalist government would have the credibility necessary to get Malta off the grey list.