Two senior officials in the Inland Revenue Department have been arrested in connection with an investigation into a dubious waiver of more than €200,000 in taxes owed.

The two were arrested on Wednesday last week and held overnight at the Floriana police depot after the police raided their offices and seized the hard drives of their office computers, police sources told Times of Malta.

Investigations had started a week earlier. Questions sent officially to the police asking for the status of the investigation remained unanswered.

However, the sources said the story goes back to 2004 when the Inland Revenue Department opened a case against two brothers after they received interest payments in the range of €100,000 when they had never declared any income.

An investigation established that between 1990 and 2004 the two failed to report income in the range of €500,000. The brothers protested but the department insisted that its claims were legitimate, at which point they filed an appeal with an internal tribunal.

At this point, before the appeal tribunal had taken a decision, a recorded tax bill of some €200,000 on the department’s system went down to zero.

The department appears to have had a sudden change of heart after the brothers produced a note from their mother, which said the money had been a donation from their late father.

However, police have been piecing together the chronology of how this decision was arrived at.

This is the second time that a major tax revenue agency is being targeted by investigations concerning bribery after the VAT Department was hit by a corruption scandal that saw some 31 people – businesspeople and department officials – being arraigned.

In all, six employees were charged but two were acquitted, while seven who pleaded guilty in 2009 received suspended sentences, despite facing up to 10 years imprisonment.

mmicallef@timesofmalta.com