In any other parliamentary democracy, not only would ministerial heads have rolled as a result of the VAT Department saga, but also that people would have instantly realised that contrary to what was implied by the Minister of Finance, the buck stops with the Ministry of Finance itself.

No amount of political contortions can justify the fact that it not only took 15 whole months for the Systems Audit of the VAT Department to see the light of day, but no one (except for the Minister’s surreal thinking) can seriously manage to de-link it from the fraudulent behaviour that had been previously exposed.

So much so that in a media release issued last Wednesday, in the wake of a PL media conference held earlier in the day, Minister Fenech was reported to have said that this board of inquiry had been set up following the VAT fraud cases, even though another English language newspaper and the state broadcasting station reported him as having said that the two cases were unrelated.

The Minister was very weak when trying to justify the fact in Parliament that in its comments on the systems audit of the VAT Department, as sent to the Permanent Secretary of the Ministry of Finance, the Economy and Investment, the VAT Department chose to send its last communication in an undated format. Without the Minister having bothered to also publish the previous correspondence that he claimed to have been exchanged between his ministry and the department.

I am saying so particularly in the light of the VAT Department’s categorical refusal that its operations lacked accountability, mainly because, in the words of the Head of the VAT Department, “Performance Plans and Reviews are sent to the Ministry of Finance and to the Office of the Prime Minister and have never been challenged on grounds of lack of accountability.”

This could only imply poor monitoring – at best – from the Ministry’s end.

Even more so when according to the VAT Department a single Departmental Report is computed on a monthly basis and is sent to the Ministry of Finance by the Director General.

The findings of the Board of Inquiry are not only shocking but they beg the question as to whether the Minister of Finance had to wait for such a damning report to realise that one of his most sensitive departments virtually broke every rule in the book – not only by having a poorly set-up customer care department and job descriptions of all staff that were not updated regularly; but, even more worryingly, where Assistant Heads of Department were not called to attend management meetings except on an ad hoc basis; where the level of certain members of the staff in supervisory positions needed to be upgraded; where, contrary to the past, in recent years VAT inspectors only received on the job or ad hoc training compared with the professional training of the past; where staff interviewed did not even know that they needed manuals or check lists while others were not even familiar with the procedures on the Department’s Intranet system.

Not to mention the fact that the number of VAT Inspectors in the Operations Directorate of the Department had declined in recent years. And implicitly not only as a result of some dismissals that might have followed the recent cases of fraud.

How can a Minister of Finance keep himself completely aloof from proceedings when he only discovered, once the VAT fraud had already taken place, that according to the Board of Inquiry “the general impression of the Board is that there is a lack of accountability and risk awareness among management at various levels together with a silo mentality in the Department which results in lack of synergy between the different sections”.

When it had to be a board of inquiry to point out that effective monitoring right across the Department is a must in order to instil awareness and to dissuade any attempts at insider fraud; this merely goes to show that the Ministry of Finance had a meltdown happening literally on its doorstep.

It is elementary – as Sherlock Holmes would have told Dr Watson – that risk management is a must in a department that has to deal with such a large number of risks and where such risks have to be constantly identified, assessed and effectively managed.

Alas, in spite of the fact that, as the report mentioned, it is common knowledge that the economic scenario is constantly changing and risks and resultant fraud change with it, it remains totally unacceptable that it had to take an independent inquiry for the Minister to realise that the VAT Department needed a risk management directorate!

Whose heads are going to roll after the Minister came to learn 15 months ago that the module for the risk assessment process – which was delivered by MITTS in 2005 – is not being used at present, the reason given being that the ratios had not been adjusted for a long time. At least by the time the inquiry report was drawn up.

Though mention is often made to an attached KPMG report whose recommendations needed to be implemented, the said report was not tabled in Parliament for reasons so far still unknown.

The most damning item of the report – which report was drawn up after the VAT fraud case surfaced – was the part that stated:

· Taxpayers who are expecting a refund are contacting the Inspectors and putting pressure on them to deal with their file as soon as possible.

· On the other hand, in cases where fraud is suspected, the favour asked might be to place the file at the bottom of the files.

While the Minister attributed the VAT scam to collusion, the report made it clear that certain practices still in vigour after the scam took place were, in its own words, part of a “system that may lead to collusion”. This means that the loopholes existing prior to the VAT fraud case were still there even months after the VAT fraud had actually taken place.

While the Minister tried to reassure us that the deregistration abuses are now being kept in check, we still have to discover how many de-registrations took place over the years; even after the VAT fraud case took place.

Particularly since, according to the Board of Inquiry, “the Board finds this disturbing especially in the light of allegations made of cases where taxpayers were de-registered in order to hide cases of fraud”.

This begs the question: Are these the same fraud cases that saw the light of day whose perpetrators were charged by the police, or are there other cases that still have to surface?

It is true that Minister Fenech is running a mega ministry, having inherited a sizeable chunk of Minister Austin Gatt’s portfolio, but this in no way absolves him of his direct political responsibilities for such shortcomings.

Leaving one and all to conclude that in spite of disclaimers to the contrary, the buck stops with the Ministry of Finance.

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