The government has scrapped a deal drawn up between the taxman and construction tycoon Charles Polidano over millions of euros in dues.

Polidano – Iċ-Ċaqnu – has been in talks with the fiscal authorities for months in a bid to shrink a massive €40 million tax bill.

In May last year, Times of Malta reported that the businessman had agreed to terms with the Inland Revenue Department to offset part of his outstanding taxes against money he is owed for public works carried out in recent years as well as land he sold to state entities. 

Charles Polidano

Polidano planned to pay around €10m of the money owed within 12 months of the deal being concluded, with a further third of the tax bill settled through a combination of monthly instalments and other securities. This would bring the settlement up to some €20million in the first year. 

The deal would also have seen Polidano forfeit money he is owed for a number of large-scale public contracts, with those funds diverted to public coffers instead. 

While tax authorities were keen to proceed with what would have been one of the IRD's largest-ever settlements, the government was less enthused and stopped the agreement in its tracks. 

The agreement had raised serious questions as to how the terms were negotiated, with the green party ADPD reporting the matter to the National Audit Office.

Deal scrapped by government

Sources privy to the negotiations have now confirmed that, when the final version of the deal was agreed upon a few weeks ago, “senior government politicians” intervened and the deal was scrapped at the eleventh hour. 

The government, the sources said, was unhappy with the terms of the deal, with a down payment deemed far too low and the overarching terms too favourable. 

Contacted for a comment, Finance Minister Clyde Caruana would only say he is not involved in negotiations over tax repayment plans and does not intervene in the workings of tax officials. 

The sources said Polidano had informed the authorities that the initial tax bill would have crippled him financially “beyond repair” and paying the sum outright was not realistic.

It is understood that the talks between Polidano and the Inland Revenue Department will now have to start from scratch. 

Negotiations had first started after Polidano was last November served with a final notice, ordering him to settle his mammoth tax bill or face possible court action. 

Several court documents – judicial acts – had instructed him to report to the Inland Revenue Department and regularise unpaid taxes stretching back to the mid-1990s.

His company, Polidano Group, is one of the leading construction firms, regularly involved in major national infrastructure projects.

Polidano, 61, is one of the wealthiest men on the island. However, associates of his say much of his wealth is tied up in immovable assets, some of which are subject to legal or administrative proceedings.

This includes his controversial Montekristo Estates on the outskirts of Siġġiewi, once described by the planning regulator as “one of the largest illegally built construction sites on the island”.

In 2020, Infrastructure Malta told Times of Malta that Polidano Group was among a number of construction operators that have been struck off the list of companies eligible to maintain and repair roads and carry out other national projects due to heavy tax dues.

However, Polidano’s companies have still been benefitting from a number of public contracts issued by other state entities.