A recent pan-European survey on ‘Statistics on Income and Living Conditions’ reported that the number of people in Malta who are at risk of poverty has risen to 82,758.

The number of such people has been on the increase over the past 10 years. This is in sharp contrast with the gross domestic product, which has grown steadily over the same period.

Earlier this year, Pope Francis, in his address to a meeting held at the Vatican with the director of the International Monetary Fund and economy ministers from around the world, proffered that “If there is extreme poverty in the midst of our wealth, also extreme wealth, it is because we have allowed the gap to widen, until it has become the largest in history”.

He admonished that “structures of sin today include repeated tax cuts for the richest people, often justified in the name of investment and development; tax havens for private and corporate profits, and the possibility of corruption by some of the largest companies in the world, often in tune with some dominant political sector”.

A paper issued by the EU commission in 2019 entitled ‘Estimating Tax Evasion by Individuals’ reported that Malta ranks first among the countries with the highest rate of tax dodgers across the EU, in terms of the GDP.

A large proportion of tax evasion is in offshore holdings. Malta’s and Cyprus’ taxpayers hold about half of their wealth abroad.

It is estimated that between 2014 and 2016, the average yearly loss in tax revenue for the Maltese coffers amounted to €120 million.

A detailed study on the distribution of wealth in Malta published last year by the Central Bank of Malta reported that wealth inequality grew at a quicker pace than income inequality. This is similar to a global trend where the rich are getting richer and the poor are getting poorer.

Regrettably, this report avoids any reference to tax evasion, which is a major cause of wealth inequality in Malta.

Pro-business pundits argue that raising tax revenue would utterly cripple an economy. Some also believe that the government budget deficit can be eliminated just by cutting wasteful state spending rather than increasing tax revenue.

This may be true, however, it is not sufficient to raise the necessary funds to narrow the inequality gaps. Efforts to generate revenue, especially through taxes, is key for governments to fund development goals, including health, education and the reduction in social and economic inequalities.

A report issued in 2018 by Oxfam said that one per cent of the world’s population owns more wealth than the other 99 per cent. The richest, the report claimed, often grow much of their wealth by way of inheritance, monopoly or close connections to the government.

Scandinavian countries consistently rank among the countries with the highest social trust, lowest corruption, strongest respect for the rule of law and lowest tax evasion. Their sense of social solidarity leads to people willing to pay higher than average taxes. This permits these economies to allocate more funds towards welfare and development.

Tax evasion is a major cause of wealth inequality- Claudio Farrugia

For these reasons, Nordic countries score very high in major welfare and development. However, this does not mean that Scandinavian governments are averse to business, on the contrary, their mixed economic systems preserve enterprise and economic autonomy.

Conversely, the US, which adopts more of a liberal approach in its economic policies, has an abysmal record in allocating sufficient budgets towards poverty eradication. Pressure from major lobby groups has consistently resulted in lower tax rates. Even the Obama presidency, elected with a promise to reduce poverty, succumbed to these pressures.

The COVID-19 pandemic has brought with it a wave of economic disruption where the poor and destitute were the worst hit. Social inequalities are now more pronounced.

We need to have societies that strive for the common good. The state is obliged to ensure that we live in a fair society. However, as individuals, we need to do our part as well.

Echoing Pope Francis’ words: “It is our duty to make sure that the earth’s fruit reaches everyone, not just a few people”.

Claudio Farrugia is a member of the Catholic Voices Network.