Speaking in parliament last January, Finance Minister Clyde Caruana solemnly issued a scathing condemnation of the organised racket surrounding tax avoidance in Malta. He promised that he would do all in his power to change the system by increasing the efficiency of tax collection and modernising Malta’s tax department.

This is all a big joke.

Today, we know that there are about €5 billion in tax arrears to be collected. And we know that Caruana’s solemn declaration is not worth the paper on which it was written.

Basically, we have been reassured that €4.3 billion of these tax arrears are not collectible. The reality is that the €5 billion tax arrears which are meant to be collected are more of a fictitious sum of money supposedly in Malta’s coffers that successive governments have gifted Malta’s tax dodgers.

After all, how can one take seriously the declarations of a finance minister like Caruana who, on the eve of the elections, together with Prime Minister Robert Abela squandered €70 million from the national coffers in order to be able to buy votes. No wonder Abela did not declare a penny in personal electoral expenses. He just used €70 million of taxpayers’ money.

How did we get to the stage where bażużli of different governments, such as the PN, the PL and who knows how many other sleazy developers and business people, will get away with never paying the taxes or VAT or electricity bills or national insurance contributions that they were supposed to pay ages ago? 

Let me explain. First of all, bear in mind that the government, to date, does not have a proper accounting system. There is no double-entry system, which is a closed circle. There is only a compilation system... where anybody’s guess is as good as mine.

And then there is the masterpiece created in John Dalli’s times. Unfortunately, this system has led to fictitious tax dues. Years ago, they introduced a system of draconian fines and penalties. And interest on late payments at usury rates. 

Furthermore, a system of deadlines was created, especially vis-à-vis companies and the self-employed. The system was engineered in such a way that if you did not file a return by a certain deadline the system generates an estimate.

Nobody knows exactly how these estimates are calculated but they are outrageous. In fact, there are bona fide businessmen who declare €50,000 tax on their average profit. But then they end up getting an estimate for €500,000, something out of this world which in no way can they settle.

This is a system designed for swindling and creative accounting- Arnold Cassola

On top of this, you get fines and interest at usury rates. Therefore, first you are assessed an inflated fictitious tax rate on your assessed income and assessed profit... and then you are charged interest, at usury rates on this assessed fictitious tax due. 

So, basically, there are smaller companies that are made to pay arrears and then it takes four years for those arrears to be credited to their account. And there are businesspeople who tell me that the more fanfare we have about electronic means and online payments etc., actually the worse it is because it is not the first time that many credits have gone astray.

Basically, this is a system designed for swindling and creative accounting.

The end result is that smaller business, companies and self-employed fall victim to this vicious circle of draconian tax assessments and fines. But the bażużli companies manage not to file their accounts or tax returns for five, 10, 15 years or more and, yet, they are still operating today... and subject to zero or ridiculous taxes.

This is the result of the clientelistic mentality whereby certain big businesses are continuously pouring money into the coffers of political parties, whereby tent rental companies rent out their tents to Labour ministers like Ian Borg at highly discounted tariffs and whereby a fledgling non-elected politician who ends up in parliament and is made a parliamentary secretary is gifted thousands of euros by those same ‘fish’ companies she has been working with in the past as part of the fisheries directorate and who she should be regulating as a junior minister.

To paraphrase my so-much-missed colleague, Oliver Friggieri: “Fil-Gżira taparsi, jinġabru t-taparsi taxxi”.... bażużli excluded.