Improved Tax Collection Hurts Maltese Business Cashflow

by Robert Banks, Tax-News.com, London

14 December 2001

The cashflow problem from which many businesses in Malta are suffering at the moment could largely be down to the recently improved efficiency in tax collection. This is according to the Bank of Valletta's chief officer for credit management and retail banking, Frank Xerri de Caro.

In an interview in this week's edition of the Malta and Financial Business Times, Mr Xerri de Caro said the Maltese banking sector was highly aware of the cashflow issue. 'This problem is specific to the business sector,' he said. 'In personal banking, ironically, customers evidently have a lot of money to save and invest, but many businesses are completely stuck.'

Although Mr Xerri de Caro said the practice of bartering had gone some way towards restricting cashflow, he also viewed the government's tax collection as a major contributor to the problem.

He said: 'Another possible reason for the jam may well be the government's efficiency in collecting revenue. Collecting taxes when they're due is good for the government, but it has probably restricted cashflow. Previously, I suspect that businesses had cashflow which pertained to government, but which was being used, even if wrongly, for these purposes.'

Mr Xerri de Caro also considered the effect of the global recession but stressed that as a small island Malta was able to adapt better to changing economic conditions than other larger countries. 'The importance now being attached to business plans, is also helping. People are growing more conscious of the returns they expect from their own business and have specific goals they want to achieve, which gives them a greater awareness of what's going on and the need to nip problems in the bud.'

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