Issue link: https://maltatoday.uberflip.com/i/1442703
5 NEWS 13.1.2022 Level playing field in tax collection and public procurement needed, the Malta Chamber says PAUL COCKS IMMEDIATE action must be taken to tackle abuse in the public procurement process, the Malta Chamber said. "ese breaches and abuses continue to happen because there is limited trans- parency in the reporting of contract var- iations and direct orders to the public, but also, because the private sector is not adequately empowered with effective remedies to challenge such illegalities," the Malta Chamber said in a statement on Wednesday. It has therefore made a number of rec- ommendations to mitigate the risk of lack of technical competence, including: 1. Mandatory advanced publication of the procurement outlook for the follow- ing six months, 2. A preliminary market consultation process, 3. Engagagment of truly independent experts in the drafting of procurement documents, 4. e requirement that modifications and variations in public contracts should also be published in the Contracts Regis- ter with full transparency on their justifi- cation and in the shortest time possible. 5. e widening of the scope of PCRB's competence to include a scrutiny of all direst orders. A year ago, the Malta Chamber of Commerce, Enterprise and Industry published its Report on Public Pro- curement Reform in collaboration with Ganado advocates. is report is widely regarded as a comprehensive document that identifies the main shortfalls in lo- cal public procurement process and pro- vides tangible recommendations on how they could be addressed. e Malta Chamber has followed up on this report by carrying out several meetings with respective stakeholders and Government entities involved in the public procurement process. Both have acknowledged the pertinence of the issues raised and the importance of addressing them effectively. Yet, the speed of implementing the required actions is not reflecting the urgency of addressing the serious existing issues in public procurement. At a time when public funds are stretched, both opti- mising taxpayer value for money and improving tax compliance by business operators themselves are pressing pri- orities. NAO Audit Report e Malta Chamber said that the NAO Audit Report for 2020, published in De- cember 2021, was rife with examples of public procurement malpractices. "Chief among these is lack of transpar- ency. e NAO report identified several instances of non-publication of award of contracts in the Government Gazette and extensive use of direct orders by some entities, in violation of the Ministry of Finance Circular No. 3/2013 – 'Public Procurement Regulations – Direct Or- ders'. is circular clearly stipulates that direct orders should be limited to the barest minimum," it said. "In its public procurement recommendations, e Malta Chamber highlighted the need to provide real justification for the award of direct orders, in full appreciation of the fact that there could be situations were direct orders are justified because they are in the public interest." e Chamber said that other objec- tionable practices highlighted by the NAO Audit Report include blatant by-passing of public procurement rules by deliberately splitting orders into lots of under €10,000. A number of contracts were flagged for substantial variations in actual contract value, compared to the original contact value tendered for and awarded. Practices that allow for sig- nificant variations and modifications in public contracts are liable for collusive and abusive practices. e NAO's audit report makes sever- al references to ensure value for money in public procurement and highlights instances of extravagant spending. e Malta Chamber understands that in certain industries image matters greatly, and it is therefore in the national interest to make use of facilities and services that project an image that is congruent with the standards of the respective industry. Yet in such instances, internal controls and justification for spending that ex- ceeds set per diem thresholds for trave- ling, need to be even more rigorous. e Malta Chamber said that in several entities where extravagant spending was highlighted, there were also weak inter- nal controls. It was to be noted that since 2020 a number of entities had made some im- provements in their internal structures and systems. It emerges from the same NAO Audit Report that gross outstand- ing tax arrears more than doubled be- tween 2016 and 2020, going from just under €3 billion to €6.3 billion. While 2020 was a very particular year during which Government granted tax deferments to help businesses cope with the impact of the Covid pandemic on their cashflow, the accumulation of tax arrears during the boom period between 2016 and 2019 is alarming. Over these three years, the country's annual GDP increased by €3.7 billion (35%) while ac- cumulated tax arrears increased by €2.2 billion (75%). Clearly, efficiency in tax collection declined dramatically during this period. Additionally, while only 18% of what was outstanding in 2016 was deemed collectable, an even lower per- centage (12%) of what was outstanding in 2020 was deemed collectable, with €5.5 of the €6.3 billion arrears estimated as not collectable. In this context, e Malta Chamber welcomed statements by Finance Minis- ter Clyde Caruana to the effect that busi- nesses who are abusing cannot continue getting away with paying their taxes at the expense of honest taxpayers, includ- ing tax compliant businesses on whom the tax burden squarely falls, and who in addition to funding public spending have to compete with non-compliant opera- tors who distort the playing field in the most unfair of ways. e Malta Chamber said there were frequent 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 mil- lions. "Operators who are not tax compliant are putting compliant businesses at a disadvantage and that the promotion of a level playing field requires penalisation of marginal defaulters in public procure- ment processes and outright disqualifi- cation of major defaulters. Taxes are part of costs, and those who do not pay them are effectively reducing their operating costs. ey are therefore in a position to put forward bids that are prima facae more competitive on cheapest compliant criteria," the Malta Chamber said. "When such businesses are actually awarded tenders, all the country is do- ing is supporting the long-term growth of tax-defaulting businesses. For every business that is not paying its dues, there are others that are paying more taxes than they would need to pay if everyone had to pay his share." FROM PAGE 1 Reports had suggested the govern- ment wanted to pump €290 million in the ailing airline but Caruana nev- er confirmed the amount. Industry sources told sister newspa- per MaltaToday that Caruana sum- moned the four unions represented at Air Malta for a meeting on Friday. e agenda was not communicated but it is expected the minister will unveil details of what was negotiated with the commission. Sources have suggested the com- mission has only agreed to green- light a fraction of the sum proposed by the government. Caruana would neither confirm nor deny the claims that the commission only accepted a reduced State aid package. Last November, Caruana told par- liament the national airline burnt through €435 million over the past 15 years. e few profits made along the years were the result of sold assets, he said, adding this was not sustainable. Any state aid would have to be ac- companied by a reform programme. A similar package for Air Malta agreed with the Commission in 2012 resulted in job cuts and reduced routes. PN calls for clear direction e Nationalist Party has called on government to be clear on the situation at the national airline. "e government's silence and concealment instead of a dialogue has now reached great absurdity," spokesperson Mario de Marco said. It said the government has excluded everyone from the process of saving Air Malta. "e Nationalist Party ex- presses full solidarity with workers who are being kept in the dark." It said Prime Minister Robert Abela should not postpone government de- cision for after the general election. "e Opposition calls on the Fi- nance Minister to refer as soon as possible to Parliament on the situa- tion," it said. Caruana mum on Air Malta state aid deal with Brussels