Nineteen years from the introduction of VAT in Malta : its impact on Zejtun businesses

Abstract

PURPOSE The primary objective of this study is to evaluate the impact of VAT on Żejtun businesses. As a result, the necessary amendments for business owners including any changes after Malta's EU membership were studied. Insights about the level of knowledge, technicality issues and stress levels with regards to VAT compliance were also gained. Recommendations, opinions and suggestions for improvement by the respondents about the future of VAT were also analysed. RESEARCH DESIGN A review of secondary data enabled the gaining of international insights about the subject. Empirical evidence was later gathered quantitatively through a census by distributing survey questionnaires to all Żejtun businesses. This enabled the above objectives to be fulfilled. FINDINGS Most of the respondents identified that VAT had a low impact on their business. However, various changes were necessary when this tax was implemented. Compliance costs are the most significant of VAT requirements, with few benefits identified. In general, respondents are relatively stressed and lack knowledge about VAT issues. They consider such issues to be technical and depend on third parties for compliance. The retaining of the current VAT system was preferred and respondents were unsure about the possible impact of a harmonised VAT rate on their business. The overall findings suggest that VAT has left a high impact on Żejtun businesses. CONCLUSIONS The results obtained points towards the conclusion that the impact of VAT on Żejtun businesses was relatively high and negative. Many confirmed that VAT-related changes were required in their business and find VAT compliance rather challenging. IMPLICATIONS/ VALUE The above conclusions imply that the education of business owners about VAT needs to be improved. The results manifest that stereotyping a business owner as an informed tax-payer might not in fact hold true.