The government has come up with a scheme to collect what it is owed in Value Added Tax, deciding to waive penalties that are supposed to be imposed on 6,500 businessmen who have so far failed to comply with court orders to pay up their dues.

In all, the government should be collecting Lm21 million in VAT, while it is offering to waive a total of Lm5.1 million in fines if the amount is paid up by 30 June.

In a press conference given by Parliamentary Secretary Tonio Fenech, it was explained that 4,200 of the businessmen involved have submitted the documentation necessary, and owe the government Lm9 million. If they pay up in time, the government will forego Lm2.8 million in penalties.

Many of the fines are between Lm100 and Lm500, but 11 have been ordered to pay up Lm30,000 or more.

The rest of the businessmen are still to submit the VAT documentation. These owe the government Lm12 million, with the fines that could be imposed reaching Lm2.3 million.

All these businessmen must pay all VAT incurred before December 2004, and they have been given more than four months to comply; if they do not, legal action will be taken against them. This will include a garnishee order and eventually criminal court proceedings for tax evasion.

Businessmen have been given enough time to pay their dues, and they have been given the chance to regularise their position without having to incur extra costs. As Mr Fenech explained, bank interest rates are lower than those of the government and therefore a bank loan is an option.

What is also important to point out is the fact that this is just a one-time offer, and those businessmen who do not take up the opportunity to benefit from this scheme would have lost their chance to bring their house in order.

The government decision to waive the fines on condition that the relevant dues are paid up by the deadline imposed is an incentive that the businessmen concerned should take up. They would be fools to ignore it, as failing to comply will eventually lead to extra costs apart from the extra inconvenience of being taken to court.

The fact that the government will be informing all 6,500 businessmen about the payment owed will also make matters easier for them. It also means that the government is leaving no stone unturned to give the businessmen all the possible chances for them to regularise their position.

One other important matter that was mentioned in the press conference was a second scheme that would be of benefit to small and medium enterprises. This scheme will see the VAT department paying refunds to self-employed persons within 30 days instead of the usual five months.

This is another incentive the government is offering to businessmen. Through it, they would have a better cash flow which they can use to re-invest. The government has therefore committed itself to pay up its dues quicker than it used to.

Likewise, the businessmen should ‘return the favour’ and pay up what they owe the government as quickly as possible. It would be of benefit to them – as they will not be incurring in fines – and to the government too.

The government has repeatedly said that it wanted to help small businesses, considered as being an important pillar of the economy. Although it would have been good to offer the same privilege to bigger companies, small businesses have been given preference over them in this regard because, as Mr Fenech pointed out, the sector is the most financially strained and will therefore really benefit from a faster VAT refund process.