More than half of businesses in Malta are not VAT compliant, the first results of an AI-powered software programme have shown. 

Finance Minister Clyde Caruana said the first results of a sample of firms reached the ministry last week and the figures have confirmed suspicions of broad tax evasion.

“From the first run (of tests), 40-45 of companies are fully compliant. The rest - there’s something wrong," the minister told a business breakfast organised by Times of Malta, admitting the figure was high but that he is not surprised.

The IT software, which is already in use in the UK, New Zealand, the Netherlands, Ireland and Canada, will be analysing VAT returns by the end of this year and all other forms of taxes within the next three years.

Clyde Caruana at the debate. Video: Karl Andrew Micallef/Emma Bonnici

Caruana was answering to a question whether there had been a change over 2019 figures when just 35-40% of businesses declared a profit.  

“By and large that figure is still the same. But we’ve seen significant improvement in businesspersons coming forward to register tax agreements. Last year, we had an increase of 50 per cent doing so,” the minister said. 

Caruana said he is confident that the clampdown on tax evasion is working and the dues have started being collected. 

Asked whether that includes the two main political parties, Caruana admitted that both the Labour and Nationalist parties have significant arrears. Both have, however, reached an agreement with the tax authorities to regularise themselves over a number of years. 

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