Lower fines for late submission of tax returns

A number of measures related to the reduction or removal of penalties linked to late submission of income tax returns and other tax-related provisions by self-employed persons have now come into force, Finance Minister John Dalli said yesterday.

Mr Dalli said the measures had been proposed by various organisations within the Malta Council for Social and Economic Development. The government had taken them on board and announced them in the last budget.

Now that the necessary structures within the relative departments were in place the measures could be implemented, he said.

A 93 per cent compliance rate in the sending back of income tax returns had been achieved. After analysing the seven per cent which were sent late and finding that these were mostly genuine cases where mistakes had been made, the government felt that it could remove the fines.

Mr Dalli said the Commissioner of Inland Revenue was empowered to reduce or remove fines for those sending in their income tax return late under certain conditions.

"We have a high compliance rate and want to keep it, so the Commissioner of Inland Revenue would impose conditions for sending them on time in future or other conditions he deems necessary," Mr Dalli said.

Reductions of up to 90 per cent would also be made in fines where the taxpayer made a genuine mistake when filling out the forms. No reductions would be made in the case of deliberate omissions or fraudulent returns.

Mr Dalli said the self-employed will also be able to deduct bad debts from their profits even if they had not yet obtained a court sentence on it. As the law stood, no one could reduce any bad debts unless there was a court judgement about the matter.

"Bad debts which do not amount to more than Lm500 per invoice and which have been outstanding for two years can be deducted from one's profits, but one cannot deduct more than two per cent of one's turnover," Mr Dalli said.

Deductions for bigger amounts covered by a court sentence can still be deducted.

Mr Dalli said another measure which would be of interest to the self-employed was that they could be given tax credits on profits that were set aside to be re-invested in the business.

Mr Dalli said self-employed can apply through the Institute for the Promotion of Small Enterprises and declare what type of investment they would be making and IPSE would then certify that the works had been carried out so that the self-employed could have an instant tax credit.

Mr Dalli said these measures complement the VAT reform that was put into force recently.

"We know exactly what we are doing and where we are heading. These measures are not being drawn out of a hat but are part of a concrete plan we drew up before the last budget," Mr Dalli said.

Mr Dalli said that although the estimate of the amount of tax owed to government stood at Lm232 million, in reality only about Lm40 million could be collected as most of the money that appeared to be due "was still the legacy of ex-officio assessments made by the socialist government in the 1980s".

The amount of money appearing as due also included some Lm60 million owed from the Drydocks.

Mr Dalli said some Lm196 million were collected in income tax last year. The government last year paid back Lm14 million in refunds, when usually the government budget for tax refunds amounted to about Lm2 million a year. All the arrears that remain to be paid by the government date to pre-1998.

The Association of General Retailers and Traders said it welcomed measures regarding the removal of penalties related to VAT.

In a statement, the GRTU said it had spoken against such penalties when VAT and CET were introduced and was now happy that its voice was being heard.