About time too! - September 7, 2009

Announcing his ministry's plans to recoup as much as possible of the € 600 million it still has outstanding from taxpayers, Finance Minister Tonio Fenech said that he understands that the ordinary taxpayer, like you and me, would flinch at the idea that these evaders will be given an amnesty which will see them pay back only the original amount they owe the Inland Revenue and only 10% of the fine they have accrued over the years.

I tend to disagree with Mr Fenech. My qualm is why did his department fail to collect these taxes before instead of waiting for the recession to bite and induce him to go for this measure? My criticism is why, in its 60 year existence, has not the Inland Revenue Department been able to collect the money due to it on time in order to avoid having to, periodically, announce an amnesty of this sort?

To be fair it is not just our local inland revenue which is resorting to such tactics. As they say, desperate times call for desperate measures.

Indeed, last Thursday, Her Majesty's Revenue and Customs (HMRC) announced that it had reached and agreement with the diminutive and secretive state of Liechtenstein which will see the latter pass on the details of British citizens who have stashed away money in this former tax haven. It is believed that there are 5000 such account holders and that these should net the HMRC around £ Stg 1 billion at the rate of roughly £ 200, 000 from each account. As the BBC commented, "Governments are particularly keen to trace and recover unpaid revenues as tax receipts fall in the global recession." (vide: Liechtenstein deal "to net £ 1bn" http://news.bbc.co.uk/2/hi/business/8237185.stm)

But back to Malta.

The Finance Minister, rightly so, added that this amnesty does not apply to VAT and Social Security defaulters. This is as it should be since such defaulters have not failed to pay money which they personally owe to the Inland Revenue but, far worse, they have failed to pass on money which they have already collected from consumers or employees onto the Government.

In this context, it is pertinent to point out that Mr Fenech was completely silent on the issue of the ring of VAT department fraudsters who ran a racket which cost the Government €10 million in unpaid VAT and bogus rebates. Admittedly the issue has been investigated by the Police and is now before the Courts. However, when the Finance Minister announces such hefty amnesties to people who owe the country loads and loads of money it is only natural to expect him to say what measures he is taking and what new checks and balances he is introducing to ensure that such fraudsters are nipped in the bud.

One may of course argue that when he announced the income tax amnesty plan on Friday, Mr Fenech was not talking about the VAT department. However, since for two Sundays now, the GWU weekly, It-Torca, has ran front page stories in which it stated categorically that it has information about a similar racket within the Inland Revenue department then it is incumbent on Mr Fenech not only to announce an amnesty for those who still have to pay their income tax but also to say what he is going to do to tighten up the Inland Revenue's operation, plug the holes and minimize, if not out-rightly eliminate, fraud and kick-back rackets.

As a matter of fact, Mr Fenech should be taking such measures within all the revenue gathering departments across the government in order to eliminate all possibilities of fraud which has to be aborted before it even raises its head. I say this because the Auditor General pointed out these short-comings at the VAT Department as far back as 2007 and nothing seems to have been done about it. In fact, the VAT racket was only uncovered because there was an honest businessman who informed the Police when he was approached to participate rather than get involved in such shady goings-on.

So no, Mr Fenech, I don't really take exception at the Income Tax amnesty you announced last Friday. But I do want to be assured that you are doing all you possibly can to crack down on any fraudsters that may be operating rackets in any department which is supposed to collect and generate revenue for the exchequer.

After the VAT Department saga and It-Torca's statements on Sunday August 23 and 30 respectively, it's more than about time too!