Nearly 75 per cent of VAT cases taken to court over the past five years were withdrawn by the department after defaulters regularised their position, statistics seen by The Times show.

The statistics indicate that the VAT Department withdrew nearly 8,650 cases of the 11,600 it had instituted against VAT registered people who failed to comply with VAT legislation.

Despite this, 75 per cent withdrawal rate, VAT Commissioner Joseph Sammut does not believe the procedures used by his department needed to be reviewed. On the contrary, he said, the system proved it was working because three-quarters of those who were served with summons to appear in court for breaching VAT legislation were bringing themselves in line before the court case started.

In 2005, the department withdrew nearly 1,200 of the 1,633 it had filed. The following year, 895 cases of 1,524 were withdrawn and in 2007, the department withdrew 1,497 cases of the 1,904 it had instituted. In 2008, the department withdrew 2,177 of the 3,046 cases it had, which included 1,105 deferred from previous years. A total of 1,798 cases were withdrawn last year of the 2,103 that had originally been filed.

Between January and August this year, the department withdrew 1,080 of the 1,338 cases it had.

Only 11 per cent of the total number of people summoned were fined over the five year period.

Businessmen complain they regularised their position when they receive the court summons because this was the first time they would have been informed about the matter.

However, Mr Sammut de­fended the department’s position saying it sent periodical statements to registered people who still had balances due and after having been served with an estimated assessment indicating that the return due was not submitted. These statements also included the administrative penalties and interest accrued by the registered person due to his defaults.

“Administrative procedures alone are not as effective as arraigning a VAT registered person in court. In fact, notwithstanding the imposition of a 0.75 per cent interest per month, as well as an administrative penalty, certain registered people still fail to comply.

“Notwithstanding the initiation of procedures, the scope of such court action is not to punish the registered person but to force him to comply with VAT legislation. In fact, the department withdraws all cases where a registered person complies with VAT legislation, even at such a late stage. The department has been adopting this approach since the introduction of VAT in Malta,” he said.

“These legal provisions have proved very effective over the years and the withdrawal of such cases confirms that their scope – the regularisation of the registered person – is being attained,” he said.

He complained that taxpayers usually moved to different premises without notifying the department of such change in address, adding that VAT legislation put the burden on the registered person to inform the department of any change of address.

He said the VAT Act provided that any assessment or periodical statements or any other correspondence served at the last known address is to be considered as delivered to the registered person.

Mr Sammut said the department did not keep track of expenses related to the filing of court cases but added that the effectiveness of such provisions was directly contributing towards the collection of VAT revenue.

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