Parliament has unanimously approved a Bill that would place four revenue-earning bodies under one regime, headed by a tax supermo to be known as the Commissioner for Revenue.
The reform has to be carried out cautiously as government income cannot be put at risk
Introducing the Bill, Finance Minister Tonio Fenech said it proposed synergy of the Inland Revenue, VAT and customs departments and the tax compliance unit. He described the move as “a very important reform”, which would help the government improve the administration of taxes and curb abuse.
The merger would enable the entities to move from a vertical to a horizontal structure – which both the IMF and the OECD encouraged – and would result in efficiency to the benefit of taxpayers.
The government had carefully analysed the decisions taken by more than 15 countries in this regard. These included Canada, New Zealand, Australia, the United States, Spain and Switzerland. In all these countries, IT emerged as the backbone of such a change.
The reform had to be carried out cautiously since the government’s income could not be put at risk given the current international economic situation. The average tax rate in Malta, the minister said, was quite low compared to that of other EU member states.
However, it was important to start the reform and appoint the Commissioner for Revenue who would be responsible for this restructuring. The day-to-day running would still be in the hands of the principal entities but the focal point and leader would be the commissioner who would take the necessary steps to implement the transformation. He would be in charge of a management team made up of directors from the various departments. He would be delegating responsibilities to ensure that the running of the entities would not be negatively affected during the restructuring.
This consolidation would help entities have a clearer picture of their operation and decisions taken by one department would not impinge on those taken by another. However, there would also be uniformity and cohesion between departments. As an example, Mr Fenech said it would now be easier to check whether a taxpayer had any outstanding payments before proceeding with issuing refunds. Thus, the merger would also result in a better service for taxpayers.
The minister promised that trade unions would be consulted in order to ensure that the alignment taking place would respect workers’ rights.
Opposition main spokesman on finance Karmenu Vella said Malta was losing some €600 million in revenue because of the black economy which amounted to around 25 per cent of the GDP. He said that last year, government revenue amounted to about €2.4 billion from a GDP amounting to €6.2 billion. An EU report had identified Malta as having a high black economy. Mr Vella supported the minister in strengthening efforts to curb abuses.
Mr Vella said that although the Bill was a step in the right direction, it fell short of implementing the necessary changes for the merger of the different tax, revenue and customs departments. The opposition would have preferred a Bill that also included the appointment of a Commissioner for Revenue.
What added value would the proposed appointment give to the different departments? No timeframe had been set and the opposition had not been informed of any plan for integration, which presented a arduous challenge. The commissioner needed all the support and assistance he could get.
Coordination between the different departments was paramount for achieving amalgamation. He recalled that the report on the VAT issue had highlighted lack of coordination among the units of this department.
Winding up the debate, Minister Fenech said the decision to achieve full integration would be taken in two to three years’ time. The merger would take place gradually so as not to cause undue up-heavals. The government would see to it that it no revenue would be lost and the thrust of fiscal legislation would not be changed.
The reform was an administrative one, which meant human resources would have to be aligned. IT systems would be put on one platform. The functions of tax compliance, investigations and collection of taxes would be amalgamated.
A plan had already been established so that the new commissioner would not start from scratch. Departmental heads would not be exonerated from their responsibilities and once the Bill was approved. Delegation of duties would follow and new responsibilities would be taken on. One of the heads would be responsible only for enforcement.
Mr Fenech declared that the opposition’s backing of the Bill helped in making the change in a serene way.
The Bill was approved unanimously.