News | Sunday, 21 December 2008

Unpaid taxes, VAT, court and traffic fines total €1.1 billion

Figures from the 2007 annual report by the Auditor General show government departments and entities are owed hundreds of millions in pending taxes, unreturned VAT and a slew of court and traffic fines that have not yet been deposited into the public coffers.
All these and several other revenue sources are part of a massive €1.1 billion in arrears, which government departments have yet to collect.
The biggest arrears are from the Inland Revenue Department, which has €731 million in uncollected tax, followed by the VAT office with €280 million. The law courts are still waiting for €9 million to be paid, while there are close to €37 million in pending capital transfer duties, and €14 million owed to Customs.
As the director of inland revenue says, “it’s enough to solve all your economic problems.”
Carmel Conti was only appointed to director-general of the IRD three weeks ago, but hopes to make the collection of arrears one of his focal points.
“It’s not an easy task to recoup these taxes, but you have to consider that arrears are partly tax assessments which are in dispute, either in court or before a board. Ultimately, it might be that we’re wrong and that the taxpayer owes €10,000 rather than €70,000 in tax. So the figure does fluctuate.”
The figure certainly changes. Last year, the IRD started off with over €628 million in arrears. It collected a sizeable €514 million and wrote off €234 million, but still ended up with €643 million in arrears at the end of 2007, apart from tax it is owed from foreign sources. At least half of it, €320 million, dates back to 1999 and pre-1999 years.
The National Audit Office, which released the figures of arrears in its annual report this week, says it is concerned that the collectable tax arrears – those which will be probably be recouped – have decreased by €6.9 million, as opposed to the increase in arrears this year of €15 million.
And who owes the biggest tax arrears? Companies, unsurprisingly, to the tune of €367 million, followed by the self-employed with €80 million, and finally private employees with €74 million. Even pensioners give the government a good run for its money, with €25 million in tax arrears.
The VAT department too has a good deal of hunting to do. It is still owed €15 million from 1994 VAT rates, and another €6.6 million in CET – the Labour tax devised during its 1996-98 legislature.
In total, the department is seeking to collect €280 million in VAT arrears, although the NAO estimated €239 million of which were under contention, statute-barred, or in the process of being written off.
The auditor general chided the department for not providing it with a breakdown of its arrears, preventing the NAO from carrying out a detailed audit. The commissioner for VAT, Joseph Sammut, refused to comment on the figure and directed this newspaper to the finance ministry.
The Capital Transfer Duty department, which collects stamp duty on transfer of assets and house sales, has €36.9 million in arrears. The NAO said it wanted to have a court magistrate that can be specifically dedicated to lawsuits in the ensuing court cases concerning the collection of stamp duty.

Other fines
A slew of fines and fees then remain uncollected by departments such as the transport authority, owed €9.2 million in road licences. Interestingly, €1.4 million is due from three corporations and a government entity, which are statute barred, and €620,000 is due from a single company, which matter is being tackled through legal correspondence.
The government property division is also owed over €8 million in rents from commercial tenants.
But then it’s the Courts of Justice that have some serious fines to collect, over €9 million, some of them outstanding over 20 years, and the Social Security Department – having overpaid €8 million in benefits, pensions, and unemployment assistance which it must recoup.
The Civil Aviation is also owed over €1.2 million in airport taxes.
Another €2.5 million in TV licence fees will not be collected since they are over five years’ outstanding, and so they are prescribed by law.
There’s also €42,614 in overpayments of maintenance grants. Students watch out. The government’s out to get its tax money back.

Arrears of revenue at the end of 2007

Department/Entity Total arrears (€)
Office of the Prime Minister 45,516
Armed Forces of Malta 142,544
Government Printing Press 129,590
Courts of Justice Division – Malta 9,078,954
Civil Protection 16,513
Government Property Division 10,577,687
Inland Revenue Department 731,192,834
Capital Transfer Duty 36,903,140
Customs Department 14,864,989
VAT Department 280,306,366
Ministry of Education and Employment 352,243
Education Division 311,826
Ministry for Tourism and Culture 1,320,105
Civil Aviation 1,277,751
Malta Transport Authority 9,285,967
Ministry for Resources and Infrastructure 1,145,275
Ministry for Gozo 282,402
Courts of Justice Division – Gozo 348,480
Health Division 1,944,198
Ministry for Investment, Industry and IT 2,362
Ministry for Rural Affairs and Environment 546,682
Ministry for Urban Development and Roads 630,171
Social Security Department 8,157,773

Total as at 31 December 2007 1,108,863,368

Source: NAO Annual Report for 2008



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