VAT Dept. review chairman resigns

The chairman of a new VAT department review committee set up after the discovery of internal fraud has resigned barely three weeks into his appointment, The Sunday Times has learnt.

It is understood that the chairman, a former civil servant who worked in the income tax department, felt "uncomfortable" about investigating people who were professional colleagues.

When contacted, Finance Minister Tonio Fenech confirmed the resignation and said another individual had already been approached to fill in the post.

"This person is reviewing the terms of reference and we are expecting a reply from him in the coming days," he said.

The committee was appointed in August. A private audit firm was also selected to assist it with its review, but the exercise has been delayed by the chairman's resignation.

The committee is tasked to carry out an internal review of the VAT department's processes, identify weaknesses in the system and suggest controls to curb abuse.

The minister has repeatedly said that any decisions related to change in the set-up of the VAT department would be taken after the committee concludes its task.

Last Friday, Mr Fenech ruled out an amnesty for VAT defaulters when launching an amnesty for income tax defaulters that would see their fines and interest slashed by 90 per cent.

Focus now shifts to the courts where, on Wednesday, 31 people are expected to be charged with various offences related to the VAT scam that is believed to have cost public coffers €10 million.

Six VAT department employees will be facing charges that include organised criminality and bribery, fraud, and, in some cases, money laundering. Five alleged middlemen will also face similar charges.

The rest, 20 businessmen, will mostly face bribery charges.

More people could be charged after the police broadened their investigation by questioning a number of auditors and financial specialists.

Those behind the scam face up to 10 years in prison, though any businessmen convicted of an offence are likely to receive lighter sentences.

When the scam began, four main actors were involved - a department official, a businessman whose relative worked at the department, and two individuals who acted as middlemen.

They took advantage of clients' ignorance of the fact that it was government policy to waive fines for late payment of VAT dues, and were taking bribes for doing so.

Eventually, the fraud became more complex, with different department officials working to waive money that businesses owed the department.

The list of businessmen contains few prominent individuals, with the majority being self-employed.

ksansone@timesofmalta.com