The tax department is to introduce computer software that will automatically alert authorities when a person or business's declared income does not tally with their accumulated wealth, Finance Minister Clyde Caruana announced on Tuesday.
This will make it far easier and quicker for the authorities to immediately detect tax evasion and act on it, Caruana said.
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.
The computer program runs daily analyses of the wealth that people and companies own and matches it with the income they declare.
It is a high-end, statistical analysis system (SAS) that uses artificial intelligence to draw data from different registries and bank accounts to assess the individual's cash deposits and illiquid assets, like property, land, vehicles and boats in a bid to help the tax department keep tabs on income and tax dues far more quickly and efficiently.
The software, which will cost the government €3 million, is among a series of measures announced in a comprehensive strategy for tax and customs administration launched on Tuesday.
'We need a culture change' - Caruana
It marks the beginning of a much-needed culture change and will alter the way that tax investigations are conducted, Caruana said. Gone are the times when people are investigated simply because someone else reported them anonymously, or because they were randomly picked and probed.
Rather, the software will run a quick, daily analysis of the population and will condense work that usually takes weeks and months into a few minutes.
"I understand some people will not appreciate this effort. They will even say it's an attack on business and that I have a grudge against business people or that I am attempting to stifle economic growth," Caruana said.
"This is absolutely not true. As finance minister, I can never be against economic growth because it's what drives employment and wealth for the people. But I am not in favour of crony capitalism, in which business people feel that paying taxes is a burden, instead of a duty.
"I want to foster an economy that awards creativity over the individual's connections. I want a country in which perseverance prevails over established power, inclusivity over exclusivity, and in which we strengthen equity and reduce inequality, and push people who work honestly over people who attempt to engage in illicit influence for their gain.
"I want to see a system that leads to progress that everyone can enjoy, not just the few. These are the concepts over which we are building the strategy we are announcing today because the people deserve better."
A strategy for tax and customs administration was launched on Tuesday at the Mediterranean Conference Centre. PHOTO: Chris Sant Fournier.'Taxes are 85% of government's revenue'
For a long time, the country dragged its feet over the enforcement of tax collection, but a change in culture is needed, Caruana said, because taxes constitute 85% of the government's revenue.
"When push came to shove with the pandemic and the Ukraine war, everyone turned to the government to fork out millions of euros to save families and businesses, and that is why taxes must be paid, to put the government in a strong financial position."
Caruana also noted a positive increase in people who are calling in to regularise themselves. Last year, the tax department registered a 42 per cent increase in tax agreements, he said. Tax agreements allow individuals and businesses with tax arrears to pay their dues over an agreed period of time.
"It was not a coincidence that last year the tax department collected €240 million more in VAT," Caruana said.
"It's because the economy is growing, but also because tax administration is strengthening its efforts to collect everything that it's due."
During the strategy launch on Tuesday, for which representatives of the International Monetary Fund were also present, Tax Commissioner Joseph Caruana said the strategy aims to make the tax collection service faster, more simplified, data-driven, effective, efficient, personalised and user-friendly.