Gaming companies are not being subjected to checks over the tax they owed, according to a report by the National Audit Office which highlights a number of flaws in procedures.
An NAO audit on a sample of gaming companies, both land based and remote, found that during 2014 the Malta Gaming Authority accepted the amount of tax due based on reports drawn up by the same companies.
The MGA does not have its own mechanism to carry out independent checks to ascertain that what is being declared in taxes is in fact true, the NAO found.
No questions are being asked and the MGA just accepts the companies’ reports.
During testing, no evidence of any checking conducted by the MGA with respect to taxation collected from licence holders was traced
“During testing, no evidence of any checking conducted by the MGA with respect to taxation collected from licence holders was traced,” the NAO said.
When asked, MGA officials confirmed to the NAO that during 2014, “no procedure was in place for the checking of taxation documents submitted and related payments”.
According to the NAO, the only vetting conducted by the MGA was made when a licence was up for renewal.
The NAO also noted that, from its sample of companies audited, 16 of them, holding 29 licences in all, “did not file player liability reports with respect to one or more months in 2014”.
“MGA will thus not be in a position to assess whether gaming operators can cover their players’ funds, especially if they were to cease operations,” the NAO concluded.
It also seems that some operators may have been allowed to wrongly defer their tax liability against the rules.
In a reaction, the MGA said the Audit Office review confirmed that the MGA was on the right track from an internal control standpoint, since the process improvements recommended in the NAO report had already been captured within the Authority's risk management system and were being addressed as part of its work programme.
"In fact, the MGA had already strengthened key functions and also created new corporate governance structures such as an Audit Committee, a Supervisory Council and the reinforcement of the internal audit function to improve the control environment - the mitigation of the identified risks and control improvements had already been initiated prior to the publication of the report. This has also been highlighted in the NAO report within the management comments section."
The MGA said that over the past two years it undertook a transformation
of its Corporate Finance function and as a result has set up a revenue
assurance unit with the objective of improving tax compliance and reporting.
In October 2015 the MGA's Regulatory Compliance Directorate was
further strengthened with additional Financial Compliance Officers to
improve the efficacy and supervision of player liabilities and funds.
"We are pleased to note that positive results are already being reported as a result of our extensive investment in financial and tax compliance resources,” the authority said.