For the reasons outlined above, adopting a European model of VAT was not going to be sustainable in the Malta context. 2.11 VAT is usually promoted as a fair and efficient tax on sales of goods within a state and on the provision in the state. Two years of experience here have shown that in Malta VAT was both inefficient and unfair. Government will ensure as fas as possible that both the inefficiency and the unfairness are removed from the new system. The problems arising from imposing the full VAT regime on a small business are particularly important in Malta, were there is a strong tradition of small businesses.
Government recognises that small businesses are vital to the well-being of our economy.
It is therefore important to ensure our taxes do not impose unnecessary compliance burdens and bureaucratic requirements while always retaining all possible safeguards against evasion and other dishonest practices. This of itself introduces considerable complexity. In addition, there were also exemptions that did not carry credit, creating in all 27 categories of exempt supply within Malta. The law required that the system had to be understood by even any small shopkeeper who might be selling food, but only someone with a thorough knowledge of the customs tariff could make any sense of this provision. This complexity also led to disputes as people disagreed over interpretation.