Publish on The Malta Independent¸ issue 15th May 2011

The second reading of the Small Business Act is proceeding ineptly in Parliament and it can be noted how both sides of the political divide are trying to score points with the electorate on this non-partisan issue. But this is an excellent law which¸ when enacted and if properly executed¸ will benefit small and medium-sized enterprises.

Yes it has been a cliché for many years that SMEs are treated as the Cinderella of the business community. Just stop and ponder how the maladroit set-up for the crafts village in Ta’ Qali has been left to simmer without any improvements for the past 10 years. This is the Mecca for cottage industry and houses a cluster of self-employed people who toil and trouble themselves to sell their wares to a dwindling flow of locals and tourists. But while the government has pumped many millions of euros in aid into various industrial estates for manufacturing barons¸ almost nothing has been spent on improving the lot of the Ta’ Qali shopping and trade centre.

However¸ all is not doom and gloom for SMEs¸ as now we herald the entrance of Dr Azzopardi¸ erstwhile parliamentary secretary for SMEs¸ with a triumphant bill entitled the ‘Small Business Act’ (SBA). On its own¸ the concept behind the SBA is to ring-fence SMEs for better protection¸ particularly against unnecessary red tape. The idea to help the green shoots in Malta has been on the books for a decade and a number of initiatives have been proposed to inculcate the concept of entrepreneurship. This concept is¸ unfortunately¸ not so naturally ingrained in the psyche of the commercial community. There are a number of pitfalls that hinder progress for SMEs¸ starting with the inhibitor to growth in Europe (and especially in Malta) when SMEs need to account for taxes. Another acute problem is accessing finance during a recession¸ and the recent offers of credit by banks are riddled with forms and requests for expensive feasibility studies.

Here it is opportune to try to ascertain if there is any real incentive for young people to become entrepreneurs. It is without doubt that the failure rate of SMEs is high¸ and studies carried out on incubation centres show that even bright ideas do not necessarily achieve commercial success. Most failures result from a lack of adequate finance¸ coupled with unbridled bureaucracy in government agencies – which¸ ironically¸ are set up and financed by taxpayers principally to nurture the industry. Taxation – both direct and indirect – is another barrier to growth. Ask anyone in business¸ and the common malady is a lack of cash flow and reduced turnover¸ but taxes have to be paid on time or interest and penalties will be imposed. So the quick solution by the Commission is to try to alleviate the burden of taxation by introducing a common consolidated corporate tax base (CCCTB). This is a pioneering concept to create a ‘one-stop-shop’ system for European companies for the filing of their tax returns. CCCTB would make it easier¸ cheaper and more convenient to do business in the EU. It would also open doors for SMEs wanting to expand beyond their domestic market. The present proposal would benefit business and would be good for the EU’s global competitiveness.

EU Taxation¸ Customs¸ Anti-Fraud and Audit Commissioner Algirdas Šemeta said: “…EU membe