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Matthew Vella
The Maltese government has been officially given permission to apply a reduced rate of VAT to the supply of electricity by the European Commission, however, it has not yet divulged relevant answers to questions asked by MaltaToday on the reduction in the tax on electricity, which is currently levied at five per cent and is absorbed by the Enemalta Corporation.
Communications co-ordinator for the Office of the Prime Minister Alan Camilleri told MaltaToday the request, which was sent by letter registered at the Commission on 18 June 2004, was a “purely administrative reform” related to the negotiations of EU accession. Camilleri said questions on whether the VAT rate on electricity will in fact be reduced, and whether the VAT burden would be passed on to the consumer, would not be answered unless research on the matter would have been carried out by this newspaper prior to making its queries.
Since first making its queries in September, no answers have been forthcoming from the Ministry of Finance, which forwarded MaltaToday’s requests to the Ministry for Industry, Investments and Information Technology, which in turn responded that the matter was entirely under the Finance Ministry’s remit.
Prime Minister Lawrence Gonzi first told MaltaToday he was not aware of the application for a reduced VAT rate on electricity when asked after his monthly media briefing in September.
Earlier this week, the Department of Information directed this newspaper to listen to the audio clips of October’s monthly briefing, in which the Prime Minister spoke about taxation and the upcoming Budget, but made no mention of any reduction in VAT on the supply of electricity. Gonzi did mention that the increasing price of oil would be affecting budget considerations.
Asked why no information would be divulged on the nature of the Maltese government’s request earlier this week, Alan Camilleri said questions had to be backed up by research carried out beforehand. “You can look at the results of the EU negotiations and conduct your research there,” Camilleri said, who claimed the reduced VAT rate was an activation of negotiations on the EU acquis and that there would be no effect on absorption. No justification was given as to why clear-cut answers to MaltaToday’s questions could not be given.
According to excerpts from the Accession Treaty supplied by the Malta-EU Information Centre, Malta was allowed to maintain a VAT exemption on foodstuffs and medicine. Other exemptions from VAT included inland and inter-island passenger transport, as well as international passenger transport, water supply, and the supply of buildings and building land, for as long as the exemption is applied by any other Member State.
The European Commission decision of 26 August 2004 lays down that since Malta’s electricity system is small and isolated, “there is no risk of distorting competition on the internal market. At present Malta does not use natural gas because it has no gas network or connection… Since the measure is a general one with no provision for exceptions, the risk of distortion of competition must be deemed non-existent.”
matthew@newsworksltd.com
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