The Malta Independent 24 July 2026, Friday
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Curbing Tax evasion

Malta Independent Tuesday, 12 April 2005, 00:00 Last update: about 14 years ago

The news that 35 per cent of taxes due to the government are not being paid is rather worrying, to say the least.

Parliamentary Secretary in the Finance Ministry Tonio Fenech gave this as a rough estimate because, according to him: “It is ultimately impossible to quantify tax evasion exactly. However, we estimate that the rate of tax compliance stands at some 65 per cent.”

This practically means that the government is getting only two-thirds of what it is due by the taxpayers. It also means that the recent efforts to reduce tax abuse, although partly successful, have not achieved their aim.

It is therefore imperative that the government’s efforts to make the system more efficient are upgraded. Malta cannot afford a situation where only two-thirds of the tax that is owed to the government is, in fact, gathered.

A greater drive is needed to ensure that everyone pays his or her dues.

It is apparently not enough to talk about the immorality of tax evasion. It is time to take action to ensure that each and every Maltese makes his or her contribution towards the running of the country.

It is extremely unfair on employees who have their income tax deducted immediately from their weekly or monthly wages to know that there are many others who simply do not pay their taxes or, at least, do not pay as much as they should.

Mr Fenech seemed to acknowledge that there is a problem, especially with regard to self-employed people. When he was asked whether he thought that the fact that only 600 self-employed persons declare they earn more than Lm16,000 a year was realistic, he replied that “something must be going wrong”.

A benchmarking system was introduced specifically with the aim of curbing abuse, but this was limited to mechanics, panel-beaters and doctors.

The success rate was very limited as, for example, only 10 per cent and 15 per cent of the first two categories submitted their tax projections. The exercise had better results among general practitioners, as 80 per cent of them reached a benchmarking agreement.

Mr Fenech said that medical specialists will be the next sector to be covered by this exercise, although he admitted that the marked differences between the various practitioners could create more problems.

But these are only three categories of self-employed people. There are many more, and the government should see that the other self-employed sectors are covered by this benchmarking system as soon as possible.

Mr Fenech said that it is not an easy matter, in a country which upholds human rights and civil liberties, and “you cannot impose on people”. While this is true, it must also be pointed out that tax evasion goes against the law and the government has the duty and the right to see that taxes it is due are paid.

Self-employed people often accuse the government of not consulting them on matters with which they are directly concerned – the most recent examples being the introduction of anti-smoking regulations and of the eco-contribution.

Yet on the other hand, the self-employed must also realise that they must play their part, too. They cannot expect the government to turn a blind eye if they are not complying with the law.

What the government should also consider is the expansion of its Tax Compliance Unit, so far consisting of 25 people.

It is often said that the government employs too many people and that some departments are over-staffed. It would be a good idea to transfer some public service employees to strengthen the TCU, naturally after they receive the necessary training.

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