€30 million in EU funds at risk as Polidano tax dispute escalates

Malta may be in danger of losing more than €30 million in EU funds aimed at infrastructural projects due to an ongoing tax dispute between the government and construction company Polidano Brothers, known as ‘ic-Caqnu’, The Shift has learned.

In the latest episode of a long-running conflict between the government and Polidano, Infrastructure Malta, the state roads agency, has filed an urgent application before the Public Contracts Review Board (PCRB) requesting an urgent decision on an appeal filed by ‘ic-Caqnu’ following the cancellation of an award of a €26 million tender.

According to Infrastructure Malta, which has commissioned external lawyers Ganado Advocates to argue its case, the latest appeal by ‘ic-Caqnu’ is just a case of delaying tactics and is putting millions of EU funds at risk of being forfeited.

While acknowledging that Polidano had every right to appeal the cancellation of the award, the public agency argued that this is being done “abusively”.

Calling for an urgent hearing of the case and a “rapid” decision, Infrastructure Malta said that “this is more critical in the case of tenders which are EU funded and subject to specific timelines”.

This case “needs to be prioritized such that no EU funds are lost, and this tender is not financed by national funds, subject to schedule,” Infrastructure Malta insisted.

Polidano wins two tenders but is not tax compliant

The issue is about two large tenders awarded to Polidano Brothers after the company submitted the lowest bids for works at Lascaris Wharf and Marsamxett Ferry Landing Place in Valletta. 

Although Polidano was originally assigned the two tenders, with a value of more than €30 million, Infrastructure Malta cancelled one of the awards because ‘Ic-Caqnu’ failed to present the required compliance certificates from the Commissioner of Inland Revenue showing that he was in line with his tax and social security payments.

While it was widely known and reported that ‘Ic-Caqnu’ had been operating for years with an enormous outstanding tax bill, reportedly reaching some €40 million, for some reason, Infrastructure Malta still allowed him to continue submitting tenders. The roads agency claimed that it is only at the end of the long process that an award winner is asked for tax compliance certificates.

On 9 March, after failing to submit updated tax certificates, Infrastructure Malta decided to annul the Lascaris Wharf award to ‘ic-Caqnu’, and instead assigned it to the second lowest bidder, G&P Borg, even though this was €5 million more costly than the Polidano bid.

So far, Infrastructure Malta has not cancelled the second tender award for the Marsamxett works (€11.9 million), but indicated that it is in the process of doing so.

Following an appeal by Polidano Brothers contesting the latest decision, arguing that the PCRB is not competent to decide on this issue as it is not impartial, Infrastructure Malta is asking for a fast-track decision. 

Also, G&P Borg Ltd filed an application claiming that it should be given the €25 million contract since Polidano is not tax compliant.

‘Ic-Caqnu’ is currently facing a series of civil cases in court filed by the Commissioner of Inland Revenue for failing to pay taxes. Various attempts to reach an out of court settlement over the years have failed.

Sources close to the ongoing procedures told The Shift that while so far Polidano has tried to solve the issue via legal routes, it is becoming clear that without these tenders the contractor will find it difficult to continue operating.

Public procurement rules clearly do not allow tenders to be awarded to operators that do not have an agreement over their taxes with the authorities. 

It is estimated that the construction business employs hundreds of people, whose jobs depend on public tenders of this sort. 

It is not being excluded that the cancellation of these tenders could result in Polidano shedding hundreds of workers in retaliation.