Month: January 2022

A year ago, the Malta Chamber of Commerce, Enterprise and Industry published its Report on Public Procurement Reform in collaboration with Ganado advocates. This report is widely regarded as a comprehensive document that identifies the main shortfalls in local public procurement process and provides tangible recommendations on how they could be addressed.

The Malta Chamber has followed up on this report by carrying out several meetings with respective stakeholders and Government entities involved in the public procurement process. Both have acknowledged the pertinence of the issues raised and the importance of addressing them effectively. Yet, the speed of implementing the required actions is not reflecting the urgency of addressing the serious existing issues in public procurement. At a time when public funds are stretched, both optimising taxpayer value for money and improving tax compliance by business operators themselves are pressing priorities.

The NAO Audit Report for 2020, that was published in December 2021, is rife with examples of public procurement malpractices. Chief among these is lack of transparency. The NAO report identified several instances of non-publication of award of contracts in the Government Gazette and extensive use of direct orders by some entities, in violation of the Ministry of Finance Circular No. 3/2013 – ‘Public Procurement Regulations – Direct Orders’. This circular clearly stipulates that direct orders should be limited to the barest minimum. In its public procurement recommendations, The Malta Chamber highlighted the need to provide real justification for the award of direct orders, in full appreciation of the fact that there could be situations were direct orders are justified because they are in the public interest.

Other objectionable practices highlighted by the NAO Audit Report include blatant by-passing of public procurement rules by deliberately splitting orders into lots of under €10,000. A number of contracts were flagged for substantial variations in actual contract value, compared to the original contact value tendered for and awarded. Practices that allow for significant variations and modifications in public contracts are liable for collusive and abusive practices.

The Malta Chamber is of the view that these breaches and abuses continue to happen because there is limited transparency in the reporting of contract variations and direct orders to the public, but also, because the private sector is not adequately empowered with effective remedies to challenge such illegalities.

The Malta Chamber has hence made a number of recommendations to mitigate the risk of lack of technical competence, including:

1. Mandatory advanced publication of the procurement outlook for the following 6 months,
2. A preliminary market consultation process,
3. Engagement of truly independent experts in the drafting of procurement documents,
4. The requirement that modifications and variations in public contracts should also be published in the Contracts Register with full transparency on their justification and in the shortest time possible.
5. The widening of the scope of PCRB’s competence to include a scrutiny of all direst orders.

The importance of implementing The Malta Chamber’s public procurement reform is further substantiated by the NAO’s audit report. It makes several references to ensure value for money in public procurement and highlights instances of extravagant spending. The Malta Chamber understands that in certain industries image matters greatly, and it is therefore in the national interest to make use of facilities and services that project an image that is congruent with the standards of the respective industry. Yet in such instances, internal controls and justification for spending that exceeds set per diem thresholds for traveling, need to be even more rigorous. The Malta Chamber cannot help noting that in several entities where extravagant spending was highlighted, there were also weak internal controls.

It is to be noted that since 2020 a number of entities have made some improvements in their internal structures and systems. It emerges from the same NAO Audit Report that gross outstanding tax arrears more than doubled between 2016 and 2020, going from just under €3 billion to €6.3 billion. While 2020 was a very particular year during which Government granted tax deferments to help businesses cope with the impact of the Covid pandemic on their cashflow, the accumulation of tax arrears during the boom period between 2016 and 2019 is alarming. Over these three years, the country’s annual GDP increased by €3.7 billion (35%) while accumulated tax arrears increased by €2.2 billion (75%). Clearly, efficiency in tax collection declined dramatically during this period. Additionally, while only 18% of what was outstanding in 2016 was deemed collectable, an even lower percentage (12%) of what was outstanding in 2020 was deemed collectable, with €5.5 of the €6.3 billion arrears estimated as not collectable.

In this context, The Malta Chamber applauds statements by Finance Minister Clyde Caruana that those businesses who are abusing cannot continue getting away with paying their taxes at the expense of honest taxpayers, including tax compliant businesses on whom the tax burden squarely falls, and who in addition to funding public spending have to compete with non-compliant operators who distort the playing field in the most unfair of ways.

The Malta Chamber continues to see disturbing reports of operators being awarded multimillion public contracts when it is publicly known that they are in arrears on tax also to the tune of millions. The Malta Chamber is unequivocable in its position that operators who are not tax compliant are putting compliant businesses at a disadvantage and that the promotion of a level playing field requires penalisation of marginal defaulters in public procurement processes and outright disqualification of major defaulters. Taxes are part of costs, and those who do not pay them are effectively reducing their operating costs. They are therefore in a position to put forward bids that are prima facae more competitive on cheapest compliant criteria. When such businesses are actually awarded tenders, all the country is doing is supporting the long-term growth of tax-defaulting businesses. For every business that is not paying its dues, there are others that are paying more taxes than they would need to pay if everyone had to pay his share.

Luc Frieden has taken office as President of Eurochambres, the association of European Chambers of Commerce and Industry. The chamber umbrella organisation represents the interests of Europe’s industry and service sector. Frieden succeeds Christoph Leitl, the former President of the Austrian Federal Economic Chamber. A longtime finance minister of the Grand Duchy of Luxembourg and current president of the Luxembourg Chamber of Commerce, Luc Frieden is a strong advocate of European integration.

“I will be an ambassador of European companies in Brussels and an ambassador of the European project vis-a-vis the corporate world”, Frieden said on his first day in office. The EU faces major challenges – both at political and economic level. The transformation to a climate-friendly and CO2-free economy requires great efforts from all companies in Europe. Businesses need favorable and predictable framework conditions to operate and make the EU Green Deal a success, as demanded by Eurochambres.

Frieden wants to encourage companies to make better use of the opportunities offered by EU’s internal market, while at the same time actively cooperating with EU institutions. Free and fair international trade is indispensable for the competitiveness of European companies. “Only they can contribute to growth and prosperity for all,” Frieden said.

The creation of an EU capital markets union as a source of financing for companies is high on the Chamber’s list of priorities. Promoting investment and increasing prosperity will be pushed by Eurochambres under Frieden’s presidency. “Europe needs ESG and business-friendly frameworks that encourage investments in digitalisation, sustainable growth and technology. Therefore, we need close cooperation between public institutions, businesses and citizens to make Europe a successful continent”, Frieden said.

At the helm of an organisation representing chambers of commerce from 43 countries, Luc Frieden also wants to use this platform to further develop complex trade relations with the EU’s neighboring countries, particularly Switzerland and the United Kingdom, as well as with other key international trading partners, especially the United States, China and Russia.

The Malta Chamber of Commerce, Enterprise and Industry is pleased to note that the Opposition has taken the initiative and put forward concrete legislative proposals to address the shortcomings identified by the public inquiry into the murder of Daphne Caruana Galizia.

Parliament is the legislative arm of the country, and it is indeed the job of our parliamentarians, from both sides of the house, to legislate and make legislative proposals.

The Chamber is also aware of the Government’s statement, that it has consulted broadly with local stakeholders and international experts with the aim of setting up a committee of experts on the legislative changes required.

In the interest of the nation The Malta Chamber hopes that Government and Opposition will work in tandem to see the required legislative changes through without delay.

In this spirit The Malta Chamber looks forward to the unveiling of the next steps in the coming days, as reported.

In its Good Governance Manifesto, that was published in January 2020, The Malta Chamber made a number of recommendations on addressing corruption and the strengthening free press.

The Malta Chamber will continue to push for improvement in better standards in these areas, as well as in others, such as management of public procurement, public sector employment, conflict of interest in public roles, lobbying, political party financing, and the resourcing of Parliament.

The Malta Chamber of Commerce, Enterprise and Industry draws attention to the fact that the latest announcement on quarantine letters oblige employers to be aware of their employees’ vaccination status. Consequently, it is imperative that employers have the right to request vaccine certificates from their employees as proof of their status.

Public health authorities announced that a quarantine release letter will no longer be issued, and a positive Covid test result will include a quarantine order for the whole household. Under current rules, the duration of quarantine for every household member is dependent on the vaccination status of the positive person and one’s own vaccination status in the case of household contacts. It is not possible for employers to be able to deduce the length of quarantine of an employee unless employers were to (i) be forwarded a with a positive test result of persons who may not be within their employ; (ii) be aware of the vaccination status of their employees; (iii) be aware of the vaccination status of the household member who is positive. The Malta Chamber believes that whilst it would be unethical to request details on the status of household members of employees, employers should have the right to request information about the vaccination status of the employees.

The Chamber has long been calling for employers to have the right to request information about the vaccination status of the employees. For the employer this is relevant information in a broader health and safety context. The Chamber appeals to authorities to adopt this pragmatic approach of limiting the duration of quarantine solely to the status of the individual employer, as otherwise it will be impossible for employers to contain abuse.

The Chamber once again appeals for the public health authorities to consider how other countries are steadily reducing quarantine periods, and the extent to which this can be replicated in Malta, particularly given the high rate of uptake of the booster.

The Malta Chamber of Commerce, Enterprise and Industry feels compelled to remind unions that their counterparts in social dialogue on behalf of their members employed by the private sector are employers and employer bodies, not Government. This is in light with the directives issued by UHM to their members in response to the postponement of opening of schools, so far by a couple of days.

For the past two years there has been close cooperation between employers and their employees, whether unionised or otherwise. This collaboration has enabled so many to work from home, to adopt more flexible working hours, and to absent themselves from work at short notice for all sorts of reasons, ranging from quarantines to school closures. Solutions must be found on the basis of dialogue and not through the issue of unilateral directives. This approach is uncalled for.

The Malta Chamber invites unions to join employer bodies in the call to be extremely judicious in determining the appropriate duration of preventive quarantine periods, particularly when employees are fully vaccinated. This will ensure that disruptions to schools and workplaces are kept to a minimum. Where particular circumstances necessitate that children under 12 are kept at home, arrangements need to be made by the parents on a case-by-case basis, with their respective employers, as has happened countless times in the past two years.

The Malta Chamber appeals to the education authorities and unions representing educators to find workable solutions that, apart from minimising disruption in workplaces, prioritize the proper education of children which is of paramount importance. There is broad consensus that online schooling can never substitute face-to-face learning. We have to acknowledge that the current generation of students has already accumulated significant educational deficit over the last two years as a result of online schooling. The Malta Chamber reiterates that every effort is expected from all concerned so that students can return to school and resume proper education at the earliest possible.