The recent news of exemptions from VAT on food and medicines is indeed gratifying. Occurrences of this nature serve to silence those voices of dissent and denial that the European Union does not understand our positions. And here I am not just talking about the man in the street. Top officials in the Labour Party have attempted to explain how our entry was not what we make it out to be – or that we were given much less in reality than is of public knowledge.
This deal shows that both the Maltese government and the EU are interested in addressing paramount issues that affect people’s lives. It also confirms that although Malta is a small country, we have a strong and determined voice in the EU. Malta had obtained a temporary derogation until 2010 during its accession negotiations. Cyprus had also made a similar request but eventually settled for a five-year transitional period which is now almost over, and Sweden has a VAT exemption only on pharmaceuticals.
This agreement builds on these negotiations, in that Malta can retain the VAT exemptions even after the expiry of the temporary derogation for as long as the UK and Ireland keep theirs. During accession negotiations, Malta had insisted that food and pharmaceuticals should remain exempt from VAT and certainly as long as these items remain exempt in the UK and Ireland. After long negotiations on this point, an agreement was finally reached during the Copenhagen Summit in December 2002 that Malta should continue to apply a zero-rate on food and medicines for a seven-year transitional period until 1 January, 2010 (subsequently extended by one year). However, Malta inserted a declaration into the Accession Treaty stating that if by 2010 the UK and Ireland still exempted VAT on food and pharmaceuticals, then Malta would consider the basis for the agreement to have changed and request an extension to its transitional period beyond 2010.
This week’s agreement proves that Malta stuck to its guns on this issue and the Maltese Government deserves great credit for this. The Maltese authorities should be congratulated for this achievement, with particular credit due to Finance Minister Tonio Fenech and to Malta’s Permanent Representative Richard Cachia Caruana.
This was an intense battle, one we may well consider a major victory. Negotiations have been ongoing for a good two years, with the final result of having the other 26 member states as well as the commission accepting our request. There was a rather tough opposition, especially at the initial stages. Negotiations, as one may well expect, came in different forms. Some heavyweights like Germany were at first contrary to our request. We now know that it was even our prime minister Dr Lawrence Gonzi that spoke to the German Chancellor Angela Merkel. Our partners were finally convinced that the deal was of utmost importance, or rather necessary, for our country.
In the European Union, VAT is paid on all foodstuffs and medicinal products under normal circumstances. The only exceptions are the United Kingdom and Ireland which had both obtained a permanent derogation. Our country now has an assurance that it can keep the current zero VAT regimes as long as the UK and Ireland keep theirs.
This proves, once again that despite being small, we still manage to persuade other member states, many a time much larger than us, to support our requests. This agreement falls within the larger context at Ecofin. This includes the possibility for EU member states to start charging reduced VAT rates on certain services such as at restaurants.
The great thing is that we are given guidelines and rules, because we form part of a club. However it is a club that understands, that listens, not just hears. These rules are seldom renegotiated to suit the different countries, and we have seen this apply to our country a number of times. As soon as I hear news of this nature, I tend to sit myself down into a memory lane daydream, recalling my days in the Moviment Iva, glad that my lifelong dream of our country forming part of this club is now indeed a reality that has a lasting effect on our country, and ultimately, our lives.
David Casa is a Nationalist MEP
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www.davidcasa.eu