The tax department is still owed some €800 million in tax arrears, according to Tax Commissioner Joseph Caruana.

Despite a significant increase in tax collection last year, thousands of individuals and businesses are yet to pay overdue taxes that go back many years, Caruana told Times of Malta.

However, he believes the figures look hopeful because more people, especially companies, are coming forward to settle their arrears by entering into repayment agreements.

The tax department registered 1,765 repayment agreements last year – an increase of 41 per cent over the previous year, he said.

A year into his appointment as tax commissioner, Caruana is now preparing to oversee a tax and customs administration reform that will automate all tax processes and introduce, among other things, artificial intelligence software to help the government catch tax cheats.

He said that all kinds of professionals and businesses are coming forward to regulate their situations and pay their dues, and there is no one particular profession or business sector that stands out, but most of them are companies.

Caruana said last year the tax department sent out 4,800 “nudging” letters to people to remind them they have tax arrears and sent out 51 per cent more demand notices, which are sent to individuals and companies who refuse to comply after several reminders.

“And the majority of them came forward and paid their dues,” Caruana said.

“Compliance rate is now up to 85 per cent, thanks to these initiatives that help us move closer to the taxpayer.”

Central Bank figures published last month confirm that revenue from both direct and indirect taxes has increased, with income tax revenue growing by almost €145 million. Meanwhile, higher VAT collection has driven indirect tax revenue up to €240 million, €38 million more than the same time last year.

VAT collection alone has grown from €206 million in the first two months of 2022 to almost €238 million over the same period in 2023, a 15 per cent increase.

“We need to be proactive. We want our department to be a leader, to be able to inform and get in contact with people,” he said.

“We want to have foresight, to keep abreast with the changes, be accountable, and run the system fairly and with integrity for everybody.”

Sign up to our free newsletters

Get the best updates straight to your inbox:
Please select at least one mailing list.

You can unsubscribe at any time by clicking the link in the footer of our emails. We use Mailchimp as our marketing platform. By subscribing, you acknowledge that your information will be transferred to Mailchimp for processing.