Nobody from the political parties, NGOs or other social partners seems to have listened to the alarm bells Julian Sammut’s sounded over the weekend. Speaking to The Malta Independent on Sunday, the restaurateur had stark words of warning that illicit practices being undertaken by some in the industry could have adverse effects not only on the catering industry itself but also on the country’s tourism sector.
Knowing that the sectors of the industry could very well turn their guns agaist him, Sammut spoke fearless. “We fear that the growing trend of VAT and tax avoidance, twinned with irregular employment methods will, if not checked efficiently and effectively, have negative effects on the local tourism sector,” he said.
Sammut, managing director of Kitchen Concepts Ltd, a local restaurant company operating 10 outlets and employing around 400 employees, summed up his concerns on the predicament of the industry he has been involved in for more than 20 years and which he clearly loves very much. He went as far as claiming that “the age of the restaurateur seems to be coming to an end.”
It is the general feeling out there that everyone wants to make hay while the sun is shining (no apologies to MDA’s Sandro Chetcuti). The economic feel good factor currently running across the country may well be tomorrow’s demise. The authorities are to blame for the lax attitude towards tax avoidance just because the country has a record GDP growth, record low unemployment and its first surplus in many years. This should be the time to enforce and not the other way round. People in the business should be ready to pay their dues to the taxman now that the economy is strong and not take the opportunity to avoid tax for higher profits when business is good.
In his interview, Sammut says the cause behind such abuse is the ever growing competition, the increasing rents – more often than not, the landlord is earning far more than the operator – and the severe lack of staff at every level, apart from the personal greed of many individuals. Operators, he says, are often faced with a Hobson’s choice of either abusing the system, in an effort to lower costs, or lose money and face failure.
One wonders what the Minister for Finance, who until last week expected to become Malta’s Deputy Prime Minister, has to say in this regard. Equally, the Opposition, which is currently still in shock and disarray, should have an opinion on the matter. The PN is still reeling from the electoral campaign and still speaking of corrupt practices by members of Cabinet yet it avoids issuing statements on the avoidance of tax. The reason is pretty obvious. Should they take the issue on board they would suffer further losses amongst the self-employed community. This is the wrong assessment, if it is the case. If ‘cowboy’ self-employed restaurateurs are short-cutting the tax system while at the same time employing foreigners at cheap rates this will come back to bite at the economy in a few years’ time.
“We know that we, and other fiscally compliant companies who play by the rules, know of cases, first hand, where restaurants with turnovers similar to ours declare half their sales, meaning that they pay half the VAT due and as a consequence of declaring lower sales they declare a minimal profit, paying far less tax than they should,” says Julian Sammut.
How the four political parties in Malta and social partners, such as MHRA, do not react to something of this sort is beyond belief. Considering that the Minister for Tourism holds secret companies in Panama and trusts in New Zealand to hide his wealth, one finds it hard to turn to the small restaurateurs and ask them to abide by the rules. Four years ago, then Deputy PN Leader Simon Busuttil used to say that under Labour the country will head straight into a brick wall (gas-down ġol-ħajt). Labour spun this into negative criticism, pointing at the success in the economy as proof of their pudding. But when one looks around and sees how the social fabric has been undermined in the past legislation one goes back to Busuttil’s prophetic words.