Fishing diesel duty-free allocation system opens door to abuse

A system through which duty-free diesel is distributed to fishermen is fraught with potential loopholes that could lead to tax evasion and the sale of contraband diesel. 

An EU directive – implemented in Malta through an agreement between the fisheries department and Malta’s two fishing cooperatives – grants fishermen the right to purchase duty-free diesel for navigation in EU waters while fishing. 

Each vessel is allocated a specific volume of fuel, which is calculated by the fisheries department according to a “formula” agreed upon by the department and the two cooperatives – the Koperattiva Nazzjonali tas-Sajd and the Ghaqda Koperattiva tas-Sajd. 

The system was originally implemented through an agreement between the co-operatives and the fisheries department in 2000 and was later revised in a subsequent agreement signed in 2007.

An industry source familiar with the process told MaltaToday that the current formula employed is based on the weight of the vessel’s annual catch, rather than on its fuel consumption. In fact, according to the 2007 agreement, fishermen are allocated one litre of duty-free diesel for roughly every €1.50-worth of fish they sell at the fish market.

“The EU directive that grants duty-free diesel specifies that it is to be used for navigation and not according to catch,” they said. “Many fishermen have an allocation of say 40,000 litres of diesel a year and nobody will question that, but if they use 10,000 litres, they can do whatever they want with the rest.”

Once calculated, the diesel allocation is communicated to the state-owned Mediterranean Offshore Bunkering Co Ltd (MOBC) which in turn advises fuelling depot operators, and issues an invoice for each fishing vessel’s allocation.

The process is overseen by the two co-operatives with which the fisheries department has a signed agreement.

The source explained that, in most countries, vessels could fill up their onboard tanks, but weren’t permitted to fill up additional portable containers, as is permitted locally. This, they explained, meant that there was no way of telling where excess diesel was going. “It’s either given to other vessels who don’t have a fuel allocation, or sold as contraband.”

Rather than lowering the risk of abuse, as the EU directive requires, the local system makes it more difficult to minimize it, they said.

In addition to the sale of contraband diesel, they said there was also an issue related to tax since fishermen could choose to register excess diesel purchased as part of their commercial expenses. 

“Their expenses are being registered against their sales, so if you factor in that diesel you owe less in tax,” they said, adding that in some cases a fisherman could be left with an extra 30,000 litres of diesel that he was free to sell.

Replies to questions sent to the fisheries department had not been received by the time of going to print.