Parliamentary Secretary reassures host families

Parliamentary Secretary Tonio Fenech said yesterday that families that host language students were still in time to regularise their position if they had not declared taxable income.

The penalties that were imposed on those who wished to regularise their position were low compared to penalties when evasion was detected, Mr Fenech said.

He however strongly criticised remarks made by Labour MP Evarist Bartolo in Parliament and in the media, saying Mr Bartolo had ended up defending people who had not paid their taxes, to the detriment of those who had.

Speaking in Parliament at the end of the debate on a Bill to amend various laws, Mr Fenech said it appeared that many host families were regular in their tax declarations and, indeed, the profits made by most of them did not exceed the threshold of Lm3,000 and were not taxable. Some had not filed their tax returns on time but they would be receiving a note telling them to avoid a repetition.

However the Inland Revenue Department would be failing its duty if it did not demand tax from those from whom it was due.

Mr Fenech said Mr Bartolo's remarks in Parliament last week were surprising and showed inconsistency by the Opposition.

First, Opposition finance spokesman Charles Mangion had criticised the government for weak law enforcement and for tax evasion, but then Mr Bartolo launched a harsh attack on tax inspectors and labelled the Tax Compliance Unit as the Tax Persecution Unit. He had said that the unit and the Inland Revenue Department were being aggressive on businesses and host families, but then he also said that tax collection should be fair. How would he justify his own latter comments when he had defended those who had not paid their tax?

Mr Fenech said that with regard to language schools, the information recently requested by the Inland Revenue Department was meant mainly to reveal the operations of the schools. But it appeared that some of the schools, instead of supplying the information promptly, had tried to turn the issue to the host families.

It was true that the sector of language teaching was important for the economy, as Mr Bartolo had said, but so were other sectors, and it would be unfair to demand tax from one and not the other.

Mr Fenech said a question he wanted to ask Mr Bartolo was whether he was advocating tax collection and law enforcement on workers only. For in his comments in Parliament he had complained that the Tax Compliance Unit and the Inland Revenue Department were persecuting businesses and host families. He had said that a war was being waged on businesses and host families, and this was harming the economy.

But if the authorities stopped demanding tax due from businesses and the self employed, who would remain other than the workers to collect tax from? Mr Fenech asked.

Mr Bartolo had also complained that tax assessments made on Small and Medium Enterprises were jamming these companies' operations. So should the Inland Revenue Department stop making such assessments?

Turning to the host families, Mr Fenech said the tax system in Malta was based on self-assessment, but tax assessors had eight years within which to query tax declarations if they suspected that information was not correct. They could also carry out their own assessment.

In this case, the Inland Revenue Department had received complaints by host families who declared their tax regularly but who said that others were getting away without paying anything. This, clearly, was not fair. What would Mr Bartolo have done? Would he not have acted?

The tax authorities had written to the schools to analyse what profit opportunities this sector offered and where this profit was going.

This was not something new for the host families. Indeed, the government had already given them an advantage in that they were not required to charge VAT.

But then one could not expect anyone making a profit of Lm6,000 not to be taxed.

Mr Bartolo, unfortunately, was being used by someone who did not want to reveal his own activity.

Mr Fenech said four schools had already supplied the information requested of them. It showed that most families had declared their income as they were required to. Others had not filed a tax return, but their profit, after deducting expenses from their income, was clearly below the Lm3,000 threshold and they were not liable for tax. These had nothing to worry about, but they would receive a note telling them to file their declarations on time.

Those families who had under-declared or not declared their taxable income had the chance to revise their returns while the penalties were still low and while no investigations had been launched. At this stage the department was only collecting information.

But, in order not to allow injustices against those who observed the law, the department was obliged to investigate those seen to have abused the system, Mr Fenech said.

Reacting to Dr Mangion's remarks on tax evasion, Mr Fenech said it was true that that there were areas where more enforcement was needed. There were also instances where VAT receipts were not being issued, which was why the penalties were being made tougher.

But enforcement was picking up. Figures showed that VAT revenue was climbing faster than economic growth. This was only the result of more efficient enforcement and collection.

Furthermore, between 2003/2004 the authorities had carried out 700 tax audits, thereby raising revenue by Lm16 million. Tax revenue as a result of enforcement by tax officials increased by Lm5.2 million this year up to the end of March.

The VAT Department last year raised Lm2.5 million which had been in arrears. The Tax compliance Unit carried out over 300 investigations of which 245 were concluded and Lm1.2 million were raised in revenue.

Mr Fenech defended the powers which this bill gives to the monitoring unit to monitor spending and recuitment by government organisations. The unit would carry out assessments of cost effectiveness and identify areas where costs could be reduced. This exercise was done by outsiders even in private companies and this was certainly no government u-turn, Mr Fenech said.

Earlier in the sitting, Helena Dalli (MLP) renewed her criticism of authorities and other bodies which had been set up to replace government departments. These new entities had raised costs but yielded no efficiency gains. Now, at last, the government was legislating to be in a better position to control the spending and recruitment by these organisations. But the fact that the government had persisted in error for so many years was shameful.

The Malta Tourism Authority was a prime example, but not the only one, of how public funds had not been used efficiently and millions of liri had been wasted. Malta Enterprise was also fast becoming a large organisation with directors and managers falling over each other, but no tangible results.

At the same time other deserving sectors, such as that of heritage, were cash-strapped.

The government always ignored the Opposition's constructive criticism but the Opposition was being proved right in several instances such as the food standards at St Vincent de Paul Home and the situation into the Foundation for Tomorrow's Schools.

The Opposition was not pleased that it could now tell the government "we told you so". It was worried that the government had taken so long to realise to the situation. And why was a law necessary for the governemnt to properly monitor what its organisations were doing? Had not the government been capable of regulating these authorities and organisations? Why did it allow them to slip through its fingers wasting millions of liri the people paid in taxes?

The bill was later approved after a division.