The Chamber of SMEs has called for a reduction of the VAT rate from 18 per cent to 15.5 per cent in an effort to mitigate inflation.

It also proposed the removal of excise tax on certain everyday items such as water, non-alcoholic beverages and toiletries.

CEO Abigail Mamo told a news conference announcing details of a business survey for 2021 that the proposals will not only address businesses’ concerns about increased costs, lower sales and decreased spending power, but also cushion the impact the increase in prices of daily items was having on businesses and their customers.

She said that if the VAT rate is reduced, the government’s revenue would remain largely unchanged because it was compensated by the price increases of certain products.

For example, a shopping basket with shampoo, fabric softener, toilet paper and a broom cost €15.05 in the last quarter of last year. Following increases in prices, this increased to €17.57 for the same items. With a revised VAT rate, the shopping basket would cost €17.09 but the VAT element is €2.29, just €0.01 less over the last quarter of last year. 

Water, non-alcoholic beverages, shampoo and hair products, personal care, make-up, shaving products, deodorants, wipes and body soaps are among the items on which there was this hidden tax.

According to the estimated government revenue from excise tax for 2022, the government was due to make €900,000 from water, €3.2 million on non-alcoholic beverages €1 million from toiletries.

Call for shorter quarantine

Mamo said the Chamber was also calling on the government to reduce quarantine periods for positive cases to five days, as suggested by the European Centre of Disease Prevention over the weekend, and five-day mask-wearing following the quarantine period.

Another proposal was for the facilitation of the employment of third-country nationals, given that members were reporting difficulties to recruit them. The chamber proposed a system with a steady flow of possible recruits and fast-track employment through a centralized system.

Businesses optimistic for a better year

Mamo said that according to a survey, more than 40 per cent of small businesses in Malta said they expected their business to fare better this year following a marked improvement in 2021 when compared to the previous year.

However, an almost equal number are not too optimistic, saying their business in 2022 will not improve on last year.

According to the annual business performance survey, businesses reported a better 2021 over 2020 but it was nowhere close to 2019, before the COVID-19 pandemic hit.  

The survey was conducted last month among 250 businesses, a quarter of which were in retail and others providing professional services, tourism, food and beverage, among others.

Asked about their biggest concerns for the year, businesses said they were seriously concerned about the increases in costs, the prolonged uncertainty due to the COVID-19 pandemic as well as the uncertainty created by the impending general election.

They are also concerned about increased labour costs, employee shortages and increased costs related to regulation and compliance.

In terms of financial constraints, their biggest concerns were sales levels, cash flow, problems with collecting payments, employee wages, banking issues and repaying deferred taxes.

At the time of the survey, more than half of the businesses questioned had up to five per cent of their workforce absent from work due to quarantine or sickness. 13 per cent had more than 30 per cent of their employees absent from work.

Asked why they fared better in 2021 over 2020, most businesses said this was due to more stability, more consumer confidence and better marketing of their products. Other reasons included more discounts made available to consumers and better consumer spending power.

On profitability, 39 per cent said their profits had decreased, 29 per cent saw increased profits while the remainder did not see any changes over 2020.