Nationalist Party leadership hopeful Bernard Grech was audited by an anti-tax fraud body two years ago, which found a series of irregularities and ordered him to pay €17,000 in VAT dues.
Times of Malta has confirmed that the 2018 investigation by the Tax Compliance Unit, which spans a number of years, uncovered signs of “undeclared income” and “unexplained bank deposits”.
Although these deposits were largely explained by Grech following meetings with the tax authorities, the audit still concluded that he appeared to have undeclared income.
Grech was also warned prior to the audit that he had been in default for 12 years between 2005 and 2016, having not submitted adequate tax returns.
The €17,000 payment is separate to a €30,000 income tax bill Grech settled last month, when already a candidate for the PN leadership.
A probe by the tax compliance unit was described by sources within the authorities as normally conducted on persons whose fiscal affairs have been repeatedly found not to be in order.
It says authorities had conducted a “bank deposit test” which had uncovered the possibility of repeated irregularities.
Replying to questions, a spokesman for Grech confirmed that he had been the subject of a tax audit and that all his affairs were in order, with no pending liabilities.
He said that he had disclosed the details to a due diligence panel as part of the process for running in next month’s election against incumbent leader Adrian Delia.
Grech’s spokesman also questioned the timing of the audit.
“It is pertinent to note that this review was coincidentally initiated only a few weeks after he was one of the main speakers at a mass meeting organised on the 7th May 2017 by the Nationalist Party as part of the 2017 general election in Balzan.
“It is significant to underline, that all amounts after self-adjustments by Dr Grech were settled before the end of October 2018.”
Earlier this month Times of Malta reported how Grech had agreed to pay off a number of outstanding tax dues after signing a payment plan to bring his fiscal affairs in order. He settled €30,000 in dues the day after the report was published and provided a copy of a tax compliance certificate issued by the authorities.
He also issued a video on social media in which he conceded that he “could have been more careful”.
The authorities’ 2018 probe looked over Grech’s financial affairs between 2005 and 2018, eventually focusing on the five-year period between 2012 and 2016.
The audit found that Grech, a family lawyer, did not operate a separate bank account for his clients’ funds, with their monies regularly included in his own deposits. The tax audit says this made it difficult to identify with precision the amounts generated from Grech’s professional activity as a lawyer, especially as he did not keep adequate records.
Irregularities in Grech’s accounts were partially explained by his wife, a teacher, depositing funds related to extra-curricular school activities including school trips overseas. Ultimately, the tax authorities gave Grech a 40 per cent reduction on the amount of tax due on these unexplained deposits.
Over the course of five years, the authorities estimate some €43,000 had been under-declared income, after the 40 per cent adjustment.
The audit also found that prior to being investigated Grech had been registered in a lower tax bracket than that which actually reflected his true earnings. Aside from his income as a lawyer, Grech had also generated money hosting foreign language students in his home.
At the end of the audit, Grech was presented with VAT dues of €17,395, which Times of Malta is informed he settled by cheque.
A spokesman for Grech said that he had declared his income “in full” and that
while he recognised he could have “been more attentive to certain oversights”, these had been recognised as minor.
Grech is up against incumbent leader Delia, himself no stranger to financial woes.
In 2018, the tax authorities agreed on an €81,000 settlement with the PN and opposition leader for unpaid taxes.