VAT enforcement to be strengthened

Parliamentary Secretary Tony Abela told parliament yesterday that the enforcement of VAT regulations would be strengthened.

"We do not want to make ourselves more difficult. Everybody makes mistakes. That is why God set up confession, but we cannot tolerate repeated, regular "mistakes".

Dr Abela referred to complaints in a recent report by the Auditor-General and said that one of the measures the government would take was to ensure that suppliers to the government would not be paid unless they produced a fiscal receipt, except when they were VAT exempt.

The parliamentary secretary was speaking when opening the debate on a bill to bring the budget measures formally into law.

He made a step by step explanation of the measures announced in the budget speech and gave an overview of the changes the bill intended to bring about.

One of the amendments was to the Local Loans (Registered Stock and Securities) Ordinance, through which the government could raise, by way of loan, a sum not exceeding Lm100 million. To raise this loan, the government would be able to issue stock in Malta under the provisions of the Local Loans Ordinance on such terms and conditions as the minister may approve.

Another amendment was to the Income Tax Act. This was removing the 1996 tax exemption on inherited property. Following debate with people in the sector, the government had come up with interim measures so as not to negatively affect those who were in a promise of sale agreement at the time of the budget.

Dr Abela said the government was also providing an interpretation to existing law to avoid the re-evaluation of property during company mergers for the purpose of tax avoidance.

Several companies had been advised to avoid tax in this way and the government may consider looking back at such cases to give the people who made use of such schemes the chance to rectify their situation.

The Social Security Act was being amended so that residents in state old people's homes would be required to contribute 80 per cent of their pension as long as this did not exceed Lm600 a year.

State homes for the elderly, Dr Abela said, were the equivalent of five-star hotels. In introducing such a measure, the government was not reducing the rights of the elderly but ensuring their future.

The bill was also amending the Import Duties Act to align HS codes to the common extended tariffs of the EU.

Another amendment was to the Duty on Documents and Transfers Act.

Following the budget, he said, all persons selling or transferring their property or transferring the rights of such property were bound to report to the Inland Revenue Department within 21 days of reaching a promise of sale agreement, paying one per cent of tax with the presentation of the promise of sale.

Such a database, Dr Abela said, would protect the rights of sellers and buyers, removing the fear that a seller could draw up different promises of sale on the same property. If a promise of sale was to be renewed, the registry had to be given notice so that it would not be declared null.

The amendment also provided that people who sold property they had inherited would pay tax on the profit they would make over the declared value.

Other amendments were to the Motor Vehicle Registration Act increasing the tax on the importation of non-commercial second hand vehicles, without rendering them uncompetitive.

Turning to the Income Tax Management Act, the Parliamentary Secretary said this was being changed so as not to have a repeat of cases where certain pre-1998 cases became time-barred because tax statements had not been accepted when delivered.

The amendment provided that pre-1998 tax assessments had to be made within eight years of the tax form being received by the Inland Revenue Department but they would still not be time-barred if received by December 31, 2008.

Such assessments would now also be sent to the taxpayer's place of work and notifications may also be issued in the Government Gazette.

An amendment was also being made regarding gains or profits from the transfer of property.

Dr Abela said provisional tax paid to a notary during the transfer of non-ordinary residences or not emanating from inheritance prior to November 25, 1992, had to be declared in the Income Tax return.

It was in the interest of taxpayers to make such declarations as they could have a right to a partial refund of the tax, but they could not expect it back if this was not declared.

Turning to the Excise Duty Act, Dr Abela said this referred to the additional excise duty paid on alcohol and tobacco. The time had come for stricter action against advertising of tobacco. The number of people suffering from terminal illness due to smoking was so large, this could be one of the factors that could reduce the life expectancy of Maltese people.