18 - 24 January 2001

Targeting the travel trade

Joe Borg Olivier, President of FATTA, speaks to Blanche Gatt about the travel industry’s consternation over recent increases in their obligatory MTA contributions

Occupying centre stage in Malta’s economic tableau, tourism remains our most important single industry, generating both revenue and employment for the island. The multiplier effect dictates that even unrelated industries are affected every time there is a shift in the fortunes of the tourist trade.
And now, hot on the heels of announcements that incoming tourism arrivals for the coming year are set to decrease, travel agents the island over are reeling under what they feel is an unfair burden of new taxes and charges coming at them simultaneously from a number of different directions.
There has been nothing equivocal about their reactions to these new charges; a flurry of press releases and news stories have occupied many column inches in the local press since the beginning of the year. Coming right in the wake of the raised cost of travel agents licences, the two separate issues that sparked these latest concerns put further pressure on the resources of travel agents.
The first matter is the introduction of VAT on all travel related
services, including accommodation and insurance, and the second concerns the dramatic increases in the private sector’s compulsory contributions to the Malta Tourism Authority.
I spoke to Joe Borg Olivier, President of the Federation of Associations of Travel and Tourism Agents, to learn more about the point of view they are attempting to convey. “First of all,” he said, “we were faced with the issue of VAT.
In his last budget speech, the minister announced that VAT would be imposed on the travel agent’s mark-up on ticket prices. However, when the legal notice (271) concerning this VAT issue was published it resulted that in fact travel agents are bound to pay VAT on the mark-up of all services rendered, including insurance, car-hire and accommodation. And, we are not permitted to pass this mark-up on to the consumer, as is the rule for all other VAT. Our view is that this is not really VAT, but it is a new turnover tax.”
The Malta Association of Travel Agents recently convened a special meeting at which they discussed how to handle this situation: “The outcome of this meeting,” said Mr Borg Olivier, “was that we gave instructions to all members to charge 1.75 per cent of all expenses as a service charge in order to cover the 15 per cent VAT and the 15 per cent of the service charge.”
“However,” he went on, “there has been a progression of incidents and we have been hit from all directions. The aforementioned incident came as a complete surprise to us. We first heard about it on budget day, and therefore we prepared to cope with the VAT on ticket mark-ups, but then the legal notice was published and what was contained within definitely did not reflect the spirit of the budget speech.”
Then, on 30 December, travel agents were given another unwelcome surprise. Mr Borg Olivier elaborated: “We knew that the rates of our contributions to the Malta Tourism Authority were going to be increased, although any feedback we were getting from the MTA came via an indirect source and we were never presented with any
formal proposals about these increases. “We do have a representative of FATTA on the board of the MTA, and the only time this issue was mentioned came late last year, on 20 November to be specific. We got to know about it a week before that, and at that stage we were under the impression that MTA was about to consult us about the matter. This, after all, is not a run-of-the-mill matter. It should have been decided with all the stakeholders involved and not unilaterally.”
The private sector has been making a contribution towards the running of MTA, and before that NTOM, since 1977. For the first seven years, these were voluntary contributions made by travel agents who would be benefiting from the added exposure Malta would be receiving as a result of NTOM’s activities in foreign markets.
In 1984 these contributions were made compulsory and the sums collected went towards paying for international publicity for the island as well as the running of the NTOM. In September 1999 the MTA was set up, along with several ancillary directorates.
“When these changes were made,” said Mr Borg Olivier, “they needed more money to run the organisation. Government already paid its own share, and we were aware that there were going to be increases in our contributions. We do not dispute the fact that we should make this contributions, but we do dispute the quantum.”
Mr Borg Olivier reiterates sev-eral times that the members of the Federation are not attempting to get out of paying their fair share towards the running of MTA. “In fact, we do feel that we should contribute to this kitty,” he continued, “but there are limitations to what we can contribute.”
The problem, he explained, is that the recently introduced rates are so much higher than previous rates. “In some cases they have actually gone up by 2000 per cent!”
“Previously,” he went on, “we used to pay a maximum of Lm250 or a minimum of Lm25 per year as our contribution, depending on the size of the agency. Now, again depending on the number of tourists handled by the agency, we are being asked to pay a maximum of Lm3,000, discounted to Lm1,500 for prompt payment, and a minimum of Lm1,500, again discounted to Lm750 for prompt
payment. Besides this, whereas before we paid one contribution, whatever the activities of the agency, now we are being dissected, and have to pay per function. So if you as an agency do some incoming, some outgoing, some excursions, some groups and conferences, which is quite common for small outfits like ours in Malta, you are going to have to pay the contribution several times over.”
Mr Borg Olivier tells me that FATTA has asked several times, both verbally and in writing, for a meeting with the MTA and the Ministry of Tourism to discuss these rates, but the response we got through our representative at MTA was that there would be no more discussion.”
FATTA reacted to this by withdrawing their representative from MTA, and issuing press releases explaining their actions to the press.
“This is a temporary measure, a form of protest about the fact that we should have been consulted about this matter,” insisted Mr Borg Olivier. “These increases are so great that they could easily break the backs of several of our members. It is unconscionable that MTA felt justified in imposing such burdens on us without even consulting us.”
He repeats that FATTA’s main issue with the MTA is over the lack of consultation. “We are complaining about the lack of discussion. When the idea of raising the rates was first introduced, the Authority talked about doubling the sum it got from the private sector. This sum then stood at Lm300,000 circa, and we understood that the MTA
wanted to take in Lm600,000. Therefore, we were prepared for our contributions to double, but when we were presented with the actual figures it was a major shock to us.”
Exactly how far FATTA’s strategy to withdraw their representative can help their case is unclear, but when I asked Mr Borg Olivier what they hope to gain from this, his answer was positive. “I have high hopes that this will bring results and I keep an optimistic view.”
However, if their withdrawal does not have the required effect, and press releases and news stories deploring the MTA’s actions do not result in any re-think of the consultation process and, subsequently, the rates of contribution, does FATTA plan to go any further with its actions? “We can’t tell what will ensue at this stage,” replied Borg Olivier. “As I said, we prefer to be optimistic, but if we don’t get further consultation then we might be forced to take further action. What shape could this action take? Well, for example, non-collaboration, in all shapes and forms. I can’t say more than that at this stage.”
FATTA is not fighting this battle alone. Joining forces with the Federation to issue a statement yesterday were the Malta Chamber of Commerce, the General Retailers and Traders Union, The Malta Federation of Industry, the Malta & Gozo Restaurants Association and the Federation of Malta Hotels, Pensions and Catering Establishments. Whether they will prevail is another matter.
“I think,” concluded Borg Olivier, “we have enough support to ensure our point of view is heard. After all, tourism is our most lucrative industry. As a valuable milk cow, we should be feeding it, not bleeding it dry.”