The Social Enterprise Act Whitepaper Roundtable Discussion

The Social Enterprise Act whitepaper roundtable discussion was opened by Mr. Pace Parascandalo, the CEO of The Malta Council of the Voluntary Sector. He elucidated that the reason behind the session was two-fold. Firstly it was to adopt a bottoms up approach, whereby, NGOs, Foundations and other relevant stakeholders could express their viewpoint on the aforementioned paper and secondly, as a means to prompt a discussions that will lead to valuable proposals with the intention of developing a more precise and adequate Social Enterprise Act.

Mr Pace Parascandalo continued to explain that the Social Enterprise Act aims to bridge the gap between Voluntary Organisations and SMEs as Profit Making Companies and to be beneficial for the financial aspect of social enterprises and also favourable to individuals. It is of fundamental importance that the act incorporates both dimensions, with special attention to the voluntary element.

The timing to re-evaluate the Act at policy level is impeccable with the purpose to evaluate its objectives and aims with the intention of moving it forward with the end target of finalising it.

The results of the discussion can be categorised in the following themes:

Defining Social Enterprise

• The definition of Social Enterprise needs to be emended to provide a more specific and clear cut definition. At present, there are various types of social enterprises and each should have clear parameters and guidelines on how to undergo procedures. Some VOs would like to establish a hybrid enterprise, which includes engaging their service users who otherwise may find it difficult to find employment. As such, the Social Enterprise Act does not acknowledge such hybrid enterprises.
• A distinction between profit and income should be included in the Act. The operation of a VO should be distinctive to the operation of a company.
• Given the diverse definitions of a social enterprise, focus should be on measuring the social benefit generated by the company. A set of indicators should be established to use for accountability which not only focuses on requirements of expected result criteria but also in terms of community
• A half way model must be created in order to encourage young enterprises to start a Social Enterprise
• The need to address tax on profit made. Potentially the cooperatives model is considered whereby only 5% tax is paid on profit made.
• The need to address the issue of claiming back paid VAT by Voluntary organisations. At the moment VOs are disadvantaged since unlike business companies they cannot claim back VAT paid on products and services purchased.

Starting a Social Enterprise

• Prior to the implementation of a social enterprise, each responsible entity must carry out a local survey to analyse whether such services will be welcomed and used by the community.
• Tax exemption benefits should be activated. Initially, Voluntary Organisations who inaugurate a social enterprise may not have abundant funding and both tax and NI contributions may wither away their available funds. Thus, exempting tax and NI contributions can provide VOs to kick start their social enterprise and allow it to flourish.
• The model of Social Enterprise must be fluid and allows Social Enterprises to move from one type of category to another. Tax percentage should be proportionate to the turnover and the Social Enterprise should move from one category to another.

Ensuring it remains a Social Enterprise

• Periodic evaluations should be carried out. These evaluations should highlight the Key Indicators that are being measured and ensure that a Social Enterprise remains one according to its operations and deliverables.
• A criteria specified in the Social Enterprise Act relates to engaging a quote of disadvantaged group employees. This defeats the purpose of the Social Enterprise Act, as any company who does not possess a social purpose will still be able to benefit from benefits that are laid out in the Act.
• A defined regulatory body needs to be determined who will be responsible in accepting, defining and monitoring the Social Enterprise.
• It is of fundamental important to eliminate, as much as possible, any potential loopholes in which a company can take advantage in setting up new companies under special conditions

Mauro Pace Parascandalo closed the discussion welcoming NGOs to provide feedback as deemed necessary in the anticipation that the Social Enterprise Act White paper progresses at Parliament level by the end of this year.