The government estimates that there is around Lm250 million of cash in hand that has not been declared and in order to urge people to deposit it, the government will be introducing a scheme for people to “come clean”.

Parliamentary Secretary Tonio Fenech said that as part of the exercise in preparation for the adoption of the euro on 1 January next year, the government would be launching the Currency and Bank Deposits Registration Scheme, whereby people can declare the cash and be exempt from retrospective action by the government for this undeclared income under the terms of the Income Tax Act.

However, the scheme will not exempt anyone from complying with the requirements of the Prevention of Money Laundering Act and related regulations.

Mr Fenech explained that this was the first step of a de-hoarding exercise being undertaken by the Central Bank of Malta. It was a one-time opportunity for people residing in Malta to regularise their position with respect to income that has not been declared for the purposes of income tax.

He said the scheme was designed to encourage a gradual surrender of the undeclared cash and to facilitate its integration into the economy.

The registration scheme will come into effect on 23 April and end on 31 July.

Assets that may be registered under the scheme are currency notes denominated in Maltese lira and euro, as well as deposits in lira and euro at local banks that have not been declared for the purposes of income tax.

Registration of lira or euro notes will be subject to the payment of a fee of four per cent, while the registration of deposits is subject to a fee of six per cent.

Mr Fenech said the scheme was being introduced in order that people who had this hoarded cash did not use it to purchase assets, such as property. This, he said, would create artificial inflation and would damage the economy.

In reply to question, Mr Fenech said this was the only such scheme the government was planning to introduce. He said that over the past few months, around Lm4 million a month was being changed into euros illegally at higher rates than should apply.

The Central Bank was planning an information campaign to help people recognise genuine euro notes and their security features, said Mr Fenech.