News | Sunday, 13 September 2009
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Labour, AD question political motives behind tax amnesty

‘Govt must reveal beneficiaries of tax amnesty’ - Mangion

The Labour Party and Alternattiva Demokratika yesterday raised their first doubts on finance minister Tonio Fenech’s tax amnesty for an alleged €600 million in unpaid income tax, penalties and accrued interest.
Shadow finance minister Charles Mangion poured cold water over Fenech’s claims on the vast shortfall of unpaid income tax, saying the real figure is far lower.
He said the National Auditor had told the parliament’s public accounts committee – of which Mangion is chairman – that the real figure owed by tax defaulters is around €128 million.
The rest of the €600 million figure is made up of ex officio tax assessments, penalties for non-payment and accrued interest, and also tax assessments on defunct companies which were never wound up.
Fenech announced last Friday that taxpayers who owe money to the Inland Revenue Department can benefit from a 90% reduction in the fines and interest accrued over the years. Defaulters will have to pay the reduced amount in full by 15 January and give up any objections or claims against the department. Others with arrears that pre-date 1998 will be asked to pay 75% of the amount due.
But Mangion yesterday asked which were the categories of taxpayers who would benefit from this tax amnesty. “Are they employees, self-employed or are they companies? This information is available to government.”
Mangion further raised doubts on the political motives behind the amnesty, asking whether it was tied to promises made by the Nationalist government right before the election.
“In the light of the recent amnesties issued by the Nationalist government, don’t such schemes encourage people not to pay their tax on time in the hope that an amnesty is announced? Doesn’t this penalise employees and self-employed, and serious companies, who pay their taxes diligently?” Mangion asked.
Mangion also called for an answer from government on allegations that tax arrears had been arbitrarily written off, due to the intervention of government “cronies”.
Alternattiva Demokratika also raised doubts on the amnesty, asking whether the scheme was primarily aimed at accommodating particular business interests.
“While incentives for on-time payment should be encouraged, government’s aim should be to collect the actual payments due rather than impose over-the-top fines, which sometimes make it impossible for even the actual payments due to be honoured,” said Michael Briguglio, spokesperson for social and economic development.
“The current fines system over-penalises many companies. Methods for paying actual dues should be negotiated and agreed upon between all parties involved. Government should make sure businesses that owe hefty amounts should pay up the fair and proper amounts due. Government should be more transparent on this issue.”
Charles Mangion said the amnesty on income tax right before the Budget will have its repercussions. “Without doubt, it is inspired by Lawrence Gonzi’s failure to reach his financial targets. Amnesties can have positive effects on companies’ cash flows, but government’s decision has been taken due its failure, and to promises it could have made to help companies.”
The left-wing group Zminijietna also criticised the amnesty, saying would reward those who did not pay their income tax due.
“It is a slap in the face of workers whose income tax is immediately paid through their wages and salaries,” said spokesperson David Pisani.
“The government is rewarding bad practices, and this has already taken place in the past with VAT defaulters, and with certain big businesses in the construction industry, through the exemption of fines amounting to millions of euros, and avoidance of paying expired transport licences.”
In a statement issued yesterday evening, the government said that revenue from the amnesty on penalties on overdue tax would help to make up for the impact of the economic and financial crisis which would see a drop of €60 million in the government’s projected revenue.
The finance ministry stressed that overdue tax would have to be paid in full, and it was only the penalties which were being reduced. The amnesty would help those who had fallen back in their tax payments, including those affected by the current economic situation.
It would also help the Inland Revenue Department to clear debts which in some cases had been accumulating since the 1980s.
The ministry added that the revenue would aid investment in the safeguarding of jobs and the social sector. “This scheme goes hand in hand with the reforms in the system of penalties and fines announced back in January, where interest was reduced to 0.75% and also capped, so that tax enforcement can be more just. Fines were reduced for late filing and omissions. It makes sense to reduce fines from previous years. The system has to be more efficient in its running and in the results it produces”

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