Finance Minister Edward Scicluna has announced five measures which will make it easier for those who are in default of VAT payments to regularise their position.

In the past, individuals or companies that were in default found themselves caught in a system which quickly became unsustainable, as interest mounted and made it harder and harder for them to get back on track.

“We have to learn from the past and see where we can improve the system,” Prof Scicluna said, stressing that the government never looked at interest and fines as being revenue, but rather as a deterrent.

“The interest rate and fines were very high. You might even describe them as ‘usury’ for those who fell behind as it made it very hard for them to ever catch up,” he said.

The measures are aimed at encouraging those in the black economy to register for VAT by making the system more “humane” for those who lapse, while still remaining firm with those who repeatedly defaulted, who he described in no uncertain terms as “parasites”.

The main measure is that the interest rate on tax due will go down from 9% per year to between 6 and 6.5%.

In order to reduce the accumulation of interest and fines, any payment made by individuals or companies in default will be apportioned towards the tax due and only after that towards the fines and interest, a reversal of the current system.

The government will also extend - for the fifth and final time - the deadline for those eligible for the amnesty announced in the 2012 Budget. Prof Scicluna stressed this extension would only apply to those who had already been determined to be eligible for the amnesty, in order to give them a chance to regularise their position.

The government will also be capping the fine on late registrations and removing the €15 a day fine on payments imposed by Court – which accumulated rapidly and often ended up putting the hapless defendant in jail for non-payment.

There are around 35,000 individuals and companies registered to pay VAT (apart from those who are exempt etc).

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