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TMCNet:  The Ali Baba effect: is it a contribution or a tax? [Malta Independent, The]

[September 01, 2014]

The Ali Baba effect: is it a contribution or a tax? [Malta Independent, The]

(Malta Independent, The Via Acquire Media NewsEdge)   We have recently been hearing a lot about the severely hit local retail trade – or rather the lack of trade and this government's laudable and valiant efforts to try and stimulate it.


This situation is partly due to an accelerated purchasing spree over the internet by the local population.

All I can say is: who can blame them? A mere glance at the local scene clearly shows that retailers have been placed at a distinct and acute disadvantage compared to foreign on line resellers. This has gone on since September 2004 (thanks mainly to a tax dreamt up by the previous administration's then Ministry for the Environment').

Allow me to explain how this piece of slapped-together tax has single handed warped the local market and the prices charged by retailers in a substantial number of products, but more pronounced in the IT and white goods sector.

Let me take you down the path, dear readers, as to how this draconian tax warps prices and actively encourages people to buy via the internet rather than from local businesses.

Take a basic computer tablet (you know those things where we had both political parties trying to outdo each other before the last election).

A 9" tablet should retail at more or less €80. But this has to be sold for some €120.

Why? Because the retailer has to add an additional €38.48 as ECO 'contribution' on top (this is apart from VAT).

  A whopping increase of practically 50% This 'inflated' cost is forced on the retailer to meet the euphemistically headed ECO contribution (hey lets all call it what it is and stop kidding ourselves shall we?  It's a TAX christened ECO). Yes, an increase of more than 50% on what you really should be paying.   A return airline ticket with a low-cost airline costs more or less the same, if not even less.

One more example; take a laptop which retails at €399. The ECO tax ends up accounting for a hefty 10% of the price. This sorry situation is practically across the whole spectrum.

What is even worse is that this ECO tax is not paid by the individual who pops over to Italy and gallops back to Malta with the very same goods. The same situation arises when buying these items straight from the likes of eBay, Amazon or any other foreign online retailer.

And to make matters worse, if you buy a €5000 server the cost is still €38.48. The same as a €80 tablet.

It does not take much of a genius to see where I am going with this. This tax puts all local retailers at a distinct disadvantage compared to all their European counterparts.

Talk about a level playing field? Well sorry but the Malta side is full of potholes and bumps like our… It is virtually (excuse the pun) impossible to compete. And don't even get me started with the costs of freighting parcel to Malta. The additional induced costs with agent's fees, Customs inspections and what not. (Note that these are effectively non-existent if an individual stuffs his car and gets loads of goods from across the pond).

As it is, it is only at the selling point that this tax comes into play. Individuals getting a computer, laptop, tablet, two TVs, printer (and the cartridges for it – yep them too), washing machine, fridge and a cache of batteries 'for own use' end up not paying a cent of this tax. But if a retailer 'sells' you these, you will be asked to pay approximately an 'extra' €320 or so for the privilege.

Retailers have been against this tax from day one.

Back in 2004 (when this tax was introduced), prices were much higher. Hence the ECO tax, unfair as it was and more so today, represented a smaller percentage of the end user price when buying from a local establishment and prices compared reasonably favourably with internet prices.

But now that the cost of these and indeed all electronic products have nosedived, the imposition of this tax has distorted the whole market, pushing people to seek 'better' prices on line at the expense of the local retailer.

Appeals to the previous administration proved futile and the unfortunate and unfair tax remained with the monies going to the exchequer, which meanwhile lost out on direct 'personal' imports anyway.

Do not kid yourself that these funds were or are used for any ecological or environmental purpose. They are just revenue. Period.

I implore this administration to take a long hard look at this situation. Laudable and welcome as it may be, it is futile offering assistance to support businesses to build their web site presence when a simple comparison of prices ends up with the local retailer looking like an overcharging Ali Baba.

  Stephen Saliba Managing Director Datax Computer Centre (c) 2013 Standard Publications Ltd. All rights reserved. Provided by SyndiGate Media Inc. (Syndigate.info).

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