Tax inspectors have received anonymous information on a VAT evasion scam involving a “major” company, the Times of Malta has learnt.

VAT Department sources said yesterday a “lengthy” anonymous letter, received in recent days, gave details on how the company in question was making use of VAT evasion software and other techniques to cheat the taxman to the tune of thousands of euros every year.

“We receive letters and tip-offs from time to time but they are normally short and abrupt. This letter is different, it shows real insight and is being taken very seriously,” the sources said.

Other sources believe the letter was probably written by someone who had possibly worked for the firm in question or perhaps still does.

A number of business owners did admit to evading VAT

“If there is more information that can be shared by this person, to help in our investigation, we implore him/her to come forward and we will respect his/her confidentiality. Alternatively, s/he can write to us again,” the VAT Department sources said.

They noted that the company had been added to a list of firms suspected of using tax-evasion software.

This newspaper reported last July that unscrupulous businesses were using software to delete records of sales in a scam thought to be costing the public coffers millions of euros in unpaid VAT. The software allows them to manipulate sales records through the digital point-of-sale system.

The Times of Malta also reported that VAT inspectors had launched undercover operations to catch companies using the software red-handed.

The authorities have brought in a team of forensic auditing experts to examine sales records of companies under investigation. A number of companies were being monitored and evidence was being compiled.

No arrests are known to have been made yet but some business owners did admit to evading VAT on the back of the investigations launched by the authorities.

They have been slapped with a €10,000 fine and ordered to pay their dues.

This newspaper has also been informed that the tax authorities were eyeing Paceville after suspicions were raised about under-declared sales in the entertainment hotspot. The authorities have received reports that nightclubs were using more than one cash register, declaring sales on one but not on the other.

“We believe there is widespread abuse in Paceville establishments and the time has come to clamp down,” the sources said.

To catch a tax dodger

According to a veteran tax investigator, the best line of investigation would be by conducting a capital accretion test: an exercise in which assets are compared to declared earnings.

“This is done by comparing the assets someone had, say 10 years ago, to what they have today,” the source said.
Comparing a suspect’s declared earnings to their expenditure is a time-consuming but telling exercise.

“It is useful in cases where the wealth obviously doesn’t match the profits declared,” the source said.

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