Finance Minister Edward Scicluna told Parliament yesterday the VAT, inland revenue and Customs departments would be merged into one authority under one director general.

The move, he added, would promise better efficiency in tax collection while facilitating the payment of arrears.

Introducing the second reading of the Commissioner for Revenue (Amendment) Bill, Prof. Scicluna also announced that Budget 2015 preparations were on track and the pre-Budget document would be issued within a month.

To address tax evasion, two legal notices would provide for the removal of interest rates and excessive penalties so that taxpayers who owed arrears would become compliant.

This would improve enforcement, help in the fight against tax evasion and avoid the duplication of work.

Human resources would be increased so that the taxpayer would be better served. The IT sections at the VAT and income tax departments were being harmonised and staff members were being given the relevant training.

Companies that were negotiating with the government because they were owed money but also owed money to the government would find the process easier as a result of the merger.

However, Prof. Scicluna stressed that businesses should not use the government as if it were a bank providing them with liquidity.

There would be a level playing field

The IT system had been upgraded so that the income tax payments for a certain year would go towards that year and only then would surplus payments cover arrears to avoid accumulation of amounts due.

The minister said he was aware that a heavy burden had been placed on companies which had to pay interest on unpaid taxes but they were being offered a practical solution.

He made it clear that there would be no negotiation on arrears on tax due, which had to be paid. The minister insisted he was speaking about the accumulation of penalties and interest fees, which would be removed.

He also wanted the arrangements planned to be made public so that those who had always paid on time would know that there was nothing being done behind their backs. There would be a level playing field and he did not wish to hear rumours that tax evaders were “getting away” with anything because they had spoken to someone.

The whole exercise would be monitored and supervised by an authority with a board made up of two members of staff from the departments concerned together with another independent, trustworthy person. They would also be making their recommendations public.

Prof. Scicluna said there would be data matching so the database of each company or individual would be under one authority.

A new VAT accounting system was being introduced to support the changes in legislation announced in this year’s Budget and to cut down on bureaucracy.

Finally, a workflow management system that would improve customer care would be ready by the end of July.

The minister raised two points that were mentioned at the MCESD and reported by the media. He said that, contrary to what was reported, the government was not planning to slash €40 million to balance its budgets.

He observed that lending on construction was declining and this was positive because it reduced the pressure and deleveraged the debt provision. There were six sectors where lending was declining and five where it was increasing. However, the decline in lending by manufacture was being compensated through other revenue streams such as bond issues.

The minister said confidence indicators in the economy were positive.

Turning to unemployment, Prof. Scicluna said the Opposition was focusing only on the registered unemployed but this was declining month – an aggregate drop of 500 unemployed in four months.

He appealed for accuracy and said that it would be better to focus on skills mismatch so that companies would not have to rely on foreign workers to make up the shortfall.

Concluding, Prof. Scicluna said the statistics on retail needed to be looked into carefully, particularly with regard to online purchases, so that an accurate picture of trail patterns could be arrived at.

Opposition spokesman Tonio Fenech and Karmenu Vella (PL) contributed to the debate.