Dozens of businesses have been caught failing to provide VAT receipts in a blitz by tax officials. 

Times of Malta is informed that, over the past few weeks, more than 250 catering establishments were inspected by officials from the VAT Department.

Of these, around a third were caught not giving customers a VAT receipt. 

Shortly after the crackdown on bars and restaurants, officials targeted beauticians, nail technicians and hairdressers, again carrying out some 260 on-site inspections.

Sources said nearly half of these businesses were found to have failed to issue VAT receipts. 

It is understood that more business categories are planned for the coming weeks in a bid to crack down on abusers.

Failing to issue a receipt is a violation of the VAT Act and carries a fine of between €700 and €3,500. 

Inland Revenue Commissioner Joseph Caruana said the authorities wanted to send out a message to businesses.

“The objective of these exercises is to get the message across all the economic sectors on the need to be compliant and to collect all the revenue due to the public coffers,” he said.

“These types of exercises that are planned to continue across all economic sectors are intended to bring about more discipline and address compliance.” 

The objective of these exercises is to get the message across all the economic sectors on the need to be compliant and to collect all the revenue due to the public coffers

Caruana said the Inland Revenue Department’s compliance and investigation recently engaged digital forensic experts that can detect fraud and suppressed sales on digital point of sales systems.

Meanwhile, what was once the VAT Department headquarters in Birkirkara is currently being converted into an investigations centre to lead the fight against tax evasion.

The government estimates it is losing out on huge sums through VAT evasion. 

According to internal estimates drawn up by the Finance Ministry’s Economic Policy Department, Malta is estimated to lose between €120 million and €150 million to VAT evasion every year.  

This figure is, however, believed by some in Malta’s fiscal authorities to be much smaller than the real amount of money being pocketed by VAT dodgers rather than passed on to the public coffers.

Some senior officials told Times of Malta the actual figure could reach as high as €300 million at the height of pre-pandemic economic activity.  

Before the onset of the COVID-19 outbreak, the Inland Revenue Department would collect some €800 million in VAT every year from taxpayers.  

According to the European Commission’s latest VAT gap report, Malta lost out on around €164 million worth of revenue during 2019.

The VAT gap is an economic formula that provides a measure of the effectiveness of VAT enforcement and compliance procedures by estimating the difference between VAT paid and the actual VAT that should have been collected.

The wider the gap, the more tax is being lost to the black-market economy.

At the start of the year, Finance Minister Clyde Caruana had warned that the government would not be lenient on tax dodgers as he cited a figure of €5 billion in tax arrears.

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