Out of €185 million estimated to be due in tax arrears, €27 million are deemed not to be collectible. Another €45 million from pre-1999 balances are due from liquidated companies. Only some 15 per cent from pre-1999 balances have ever been retrieved.
If the amount involved was over €6,000, the direct order could be approved only by the Minister of Finance
The information was given at the first meeting of Parliament’s Public Accounts Committee on Monday by Mario Borg, Commissioner of Inland Revenue. The PAC was meeting under the new chairmanship of former Finance Minister Tonio Fenech with all but himself and another member being newcomers to the committee.
Mr Borg said that while taxpayers had assessed themselves to owe €361 million since 1999, the department estimated that the correct figure owed was closer to €258 million.
One difficulty of tracing old documents had been resolved in 2004 when every document submitted started being scanned.
VAT Department director general Charles Vella acknowledged that while the department could take any length of time to consider an objection to an assessment, the interests accrued due to late payment continued to accumulate. But, he said, the department could not do any better due to its small staff complement.
Mr Vella said the VAT department was owed a backlog of €597 million since 1998 but experience had shown these figures appeared to be inflated. In actual fact the department thought that only €31.6 million were actually collectible.
In view of the proposed merger of the IRD and VAT department, Mr Vella said one of the first aspects that were being worked on was the streamlining of chasing, particularly through electronic systems. Officials of both departments sometimes met in court and realised they were chasing the same persons.
Mr Borg concurred that every action was now being taken within the context of the merger, with priority on collection of dues.
Mr Vella said the VAT department worked on three thresholds in its assessment of small businesses: €14,000 a year for services that did not add value, €24,000 for services that added value, and €35,000 for sales of goods. One of the most common abuses was for someone to open a small business, then ask for a change of registration with a view to pulling back VAT payments.
He repeatedly said that interests on unpaid VAT were considered as revenue, but fines for late payment were just a deterrent. VAT legislation gave the commissioner powers to mitigate fines but he could not touch interests.
Another aspect this first meeting of the PAC considered was direct orders approved retroactively. Joe Croker, representing the Treasury, said that since 2011, when it had been decided not to authorise retroactive direct orders, the incidence had been reduced. Cases were being refused outright.
Director-General of Contracts Frans Attard said that direct orders should be approved only on an exceptional basis. There were specifications on who could approve a direct order and in what circumstances. The maximum allowed was €130,000 for the purchase of services or supplies and €5 million for works. If the amount involved was over €6,000, the direct order could be approved only by the Minister of Finance, not by a minister for his or her own ministry.
At the latter end of the meeting, Energy Minister Konrad Mizzi was asked to give the PAC an opportunity to know more about the call for expressions of interest that the Government was unwilling to lay on the Table of the House, without the commercially-sensitive information.
Dr Mizzi countered that the PAC existed to scrutinise completed processes examined by the Auditor-General. He had no problems answering questions but the proper forum was the House in plenary session.
He said he would seek advice on the request and revert at a subsequent PAC meeting.