Editorial | Sunday, 22 March 2009

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Labour’s costly gamble

The recent campaign launched by the Labour party to file thousands of cases in the name of consumers who purchased vehicles or imported used cars to Malta and paid VAT on the portion of registration tax – when in fact they should not have – is in itself a welcome campaign.
Most people – rather superficially – welcomed European accession because of the fiscal advantages that came with it. Notably, one should mention that fiscal aberrations of this kind, in which government illicitly levies VAT on registration tax, is the kind of misnomer that the EU should be handling. As a recent case before the European Court of Justice shows, no government can consider itself to be above the law when it comes to justice on fiscal matters. The levying of VAT on a tax was a costly burden for purchasers of vehicles.
It is an irony that Labour, which opposed European accession five years ago, is championing the EU and all it stands for; and that the Nationalist party, which took Malta into the EU, continues is dragging its feet over such measures.
Labour has now embarked on an impressive campaign – filing lawsuits in the name of some 14,000 car owners before the Maltese courts to claim a refund of the contentious VAT. According to government, the exercise would mean parting with some €50 million in revenue, a veritable financial hole. Joseph Muscat has countered by saying that the government has already pledged an €80 million spend on the Valletta rehabilitation project – so the money is there for the refund to take place.
But in launching this campaign, the state of ill preparedness in Labour’s kitchen cabinet seems to have been exposed.
In registering up to 14,000 individuals with imported cars, Labour has unbelievably forgotten that local judicial procedures will lead to the forking out of court expenses that could amount to a million euros, because each claim might have to be filed individually.
For a political party suffering from some very serious money problems and debt, the news that the court actions will lead to such a cost comes as very bad news.
Indeed the simple judicial protest presented will not elicit any change in Tonio Fenech’s decision not to hand back the VAT charged on cars.
The possibility of class action is also out of the question. This is a judicial procedure that exists in the US but not in Malta and most European judicial systems. While in the US a class of plaintiffs can file for damages against an entity, this is not possible in Malta.
It is strange that no one in Labour offered useful advice to the leader Joseph Muscat, surrounded as he is by an army of lawyer MPs. It is a pity that an issue which could have served both the public and Labour well might be stalled because of an ill-thought approach to the whole issue.
The PL needs to be better informed and prepared before it gets involved in any campaign.
It will also give the government more time to continue procrastinating in introducing EU norms which should benefit the general public.
True, the lifting of such fiscal measures will mean less revenue for government, which goes to show that most governments are intrinsically governed by balancing the budget rather than improving the purchasing power in the public.
More importantly, the finance ministry’s intransigence to lift VAT on imported cars may very well have to do with the car importers’ lobby. There is little doubt that the eradication of VAT will lead to serious problems in the viability of the car importers’ industry – because this might even make used car importation even cheaper since the recent overhaul of registration tax and road licence tax.
On a far less populist note, but definitely important, the importation of more used cars and their accessibility may lead to more congestion in our roads and more pollution problems.
Yet, there is little doubt in our mind that the vast majority support Muscat’s initiative even though they are grossly unaware of his lack of cognisance of the judicial process in the local courts.
It has to be seen how the whole campaign will unfold.

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