NEWS | Wednesday, 04 June 2008

Fenech, Commission disagree on departure tax notification

Charlot Zahra

As Finance Minister Tonio Fenech defends the decision to remove the departure tax not earlier than November this year, by the time this newspaper went to print, the EU commission was not informed of any such developments.
Asked by this newspaper about why the removal of this tax is being left until after the holiday season, a spokesperson for Fenech said: “The electoral promise by the Nationalist Party was to remove the tax during the new legislature - something which it is actually doing in the first few months.
“There are a number of reasons why this cannot be done before. It needs to go to Parliament and this takes at least a month. Also the tax change is being made in the period new offers and prices for the season come into place - without complicating the situation for operators in the sector.
“This change is being done within the annual parameters of the normal budget process,” the Ministry spokesperson contended.
Asked whether the Maltese Government had informed the European Commission about its decision, the Ministry spokesperson said: “The European Commission has been formally notified of our intentions.”
However, asked about the matter, a spokesperson for the European Commission told Business Today: “So far, the European Commission has not received from the Maltese authorities formal notification of adoption of any new legislation on this issue.”
On 27 June 2007, the Commission had taken a decision to take the case before the European Court of Justice in Luxembourg for violation of the EU Treaty.
However, in November 2007 the Commission decided to freeze this decision “because the Maltese authorities claimed that the new legislation would be imminent,” the Commission spokesperson told Business Today.

In fact, in last year’s Budget Speech, the Government reduced the Departure Tax by half.
In view of the Government’s announcement, the European Commission was also asked whether it would be lifting its infringement proceedings against Malta in this respect, and whether it would press on with its case until the Maltese Government actually removes the Departure Tax.
“In the meantime, no decision to put an end to this situation and to go ahead with the Court case has been taken. This means that the case remains on hold (“frozen”) until the Commission decides otherwise,” the commission spokesperson told Business Today.
“The Commission will adopt the next package of infringement decisions this coming Thursday 5 June (tomorrow),” he said. The airport departure tax in Malta will be on their agenda.
Earlier, the Commission had sent a letter of formal notice to the Maltese authorities (the first stage of the proceedings) on 4 July 2006, followed by a motivated opinion on 15 December 2006 (the second stage) after the Commission did not deem their response about the matter as satisfactory.
Also approached for his reactions was Airmalta Chairman Lawrence Zammit, who envisaged no postponement from outbound holiday makers, in view of the announcement that departure tax would be levied in November.
“From the amount of bookings that the airline has for the summer season, it is unlikely that people who want to go abroad would postpone their summer holidays because of the departure tax, he stated.
Asked for his reaction to the fact that the departure tax was only being removed as from November and not earlier, Zammit told Business Today that the airline was not so preoccupied about the matter:
“The departure tax is imposed on all Maltese passengers leaving Malta, therefore it does not discriminate against Air Malta since all airlines have to pay it. There is therefore a level playing field.
“Moreover, the departure tax is only Lm 10 out of a Lm250 trip, therefore a very small percentage. Those who want to travel abroad will not be deterred because of the departure tax,” he said.
Another factor that has affected the cost of airline tickets more than the departure tax was the introduction of low-cost carriers, which decreased the price of airline tickets substantially.
“However the ever-increasing price of oil will surely push up airline fares upwards again,” Zammit told Business Today.
On his part, Iain Tonna, President of the Federated Association Of Travel & Tourism Agents (FATTA) – Malta, which represents travel agents, told Business Today that the majority of people who had to book their summer holidays abroad did so.
“However those who were planning to go abroad on holiday in October and November are now holding a bit back,” Tonna said.
Asked for his reaction to the fact that the departure tax was only being removed as from November and not earlier, the FATTA President did not mince his words.
“The Government knew that it had to remove this tax for good. Last year it should have removed all the departure tax, not half of it.
“The excuse that the departure tax will be removed as from next November to coincide with the opening of the new booking season does not convince us. After all, the departure tax is a very good source of revenue for the Government,” Tonna concluded.

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