Four company directors who were found guilty of not filing tax returns and failing to pay some €1.8 million in taxes, have been spared paying fines and penalties, running up to millions of euro, after being acquitted on appeal.

Carmel Deguara, Martin Deguara, Brian Micallef and Emmanuele Micallef,  directors of Devlands Ltd, were convicted by a Magistrates’ Court in March of failing to submit returns and pay tax between 2004 and 2014.

They were each slapped with a €1,000 fine and ordered to pay a €5 daily surcharge from the date of judgment up to the day the amount due, including fines and interest, was paid.

That total sum would have gone up into millions of euro.  

In their appeal, they argued that the evidence put forward by the prosecution lacked “precision and certainty.”

The directors’ lawyers argued that when testifying before the first court, the representative of the Tax Department had made reference to “some” tax forms, the fact that “not all payments were made” and that the outstanding balance owed to the taxman stood at “over €1.9 million as pure tax.” But he did not produce documentary evidence to show that some of the forms had actually been submitted late.

Nor was any account produced to explain how the department reached the amount it claimed to be owed.

The commissioner ought to have quantified “to the least cent” and put forward all evidence to support his conclusions. Therefore the first court could not determine the exact amount owed, nor find guilt, the lawyers said.

Citing Maltese and English judgments, they argued that just as no compensation should be ordered unless the sum claimed is either agreed upon or proved, so also no one should face criminal charges for failing to pay tax for an amount that was not quantified whatsoever.

Madam Justice Consuelo Scerri Herrera presiding the Court of Criminal Appeal stated since the testimonies given before the first court were not transcribed, the second court could never know the precise words spoken by those witnesses.

For that reason, the representatives of the Tax Commissioner and the Registrar of Companies were summoned to testify again.

The taxman’s representative said that he had explained before the first court how the amounts were calculated on the basis of documents filed by the directors themselves.

He also exhibited a summary of outstanding yearly balances owed to the department.

However, “without hesitation,” the court held that the appellants were right in saying that the amounts owed were uncertain.

The global sum which the department claimed to be owed, was “nowhere to be found,” and neither did the taxman explain how the €1.8 million figure had been reached.

A settlement agreement was signed in 2012, whilst charges referred also to 2014.

Moreover, the witness said that “they had all amounts relative to each year targeted by the charges because all FS7s had been presented.”

The court would have expected to be provided with a total computation as well as all FS7s, together with a global summary reflecting the charges, observed Madam Justice Scerri Herrera.

The court’s function was to scrutinise the acts of the case, hear evidence and decide whether that evidence presented by the prosecution was the ‘best evidence.’

“However the court is not expected to fill in any gap left by the prosecution nor to try to assume what the prosecution meant to say,” observed the judge.

The evidence put forward by the prosecution was “rather fragmented,” concluded the court and whilst declaring that the tax department could seek a civil remedy, it fully acquitted all four directors.

Lawyers Arthur Azzopardi and Jacob Magri were defence counsel.