The government cannot continue to tolerate a situation where many businesses get away with not paying their taxes, thus creating an uneven playing field with honest taxpayers, Finance Minister Clyde Caruana told parliament on Monday.

"The government is not an overdraft facility," he insisted.

The minister was speaking during a debate on a motion, moved by the opposition, calling for the repeal of a legal notice issued in November allowing companies to sell off property to settle their taxes.

Caruana said that while the opposition wanted the legal notice repealed, claiming it was discriminatory and benefited defaulters, no one had actually applied to benefit from it.

And he did not think anyone would because the mentality in Malta was that the government did not act to collect what it was due.

"This has to stop," he insisted. 

The government was owed €5 billion in tax arrears, and he could not close an eye to it.

From now on, taxes due had to be paid promptly, he said. Secondly, attempts would be made to collect what was due in the past.

Those who had not applied under this measure, thinking they could get away with not paying tax, should not complain in the coming months when measures are introduced to recover tax due, he warned. 

One also needed to end the mentality where so many companies, in a good year, claimed to break even or make a loss, when, clearly, that was not the case. 

Those companies which did not pay their due taxes had an unfair advantage in, tendering for contracts, for example, compared to those which paid their taxes on time. 

"One could not continue to have situations where people thought they could do what they liked, because they had the money.

"As long as I am finance minister I intend to bring about a culture change. In the same way people expect the government to offer the best education, health, and infrastructure they should also expect efficiency in tax collection," he said.  

Effective tax collection would not mean he was against business. Rather, he was against those who thought the people's money helped them to grow their personal assets.    

Opposition motion

The Opposition's motion was moved by shadow minister for finance Mario de Marco, who recalled that the legal notice, published in November, and drawn immediate controversy.

The new measure, he explained, allows those with tax arrears due by January 2021 to pay any tax due on the transfer of property purchased before March 2021 against their arrears.    

He said this legal notice had nothing to do with COVID measures and it in practice amounted to an amnesty for those who had not paid tax when due. The government was forgiving the equivalent of tax due on the sale of property.

It was no surprise that most of the social partners were critical of it, including the Chamber of Commerce which said it created an uneven playing field in favour of those who defaulted tax. 

The Malta Institute of Accountants and the Institute of Financial Practitioners said this was tantamount to a tax amnesty and a slap in the face for those who acted in full compliance of the law.

They also said that "any amnesty or other prescribed or conventional mechanism which effectively rewards defaulting taxpayers is patently inequitable and should not be entertained, much less promulgated and implemented, in a modern and mature democracy".

The Malta Developers' Association also expressed itself against the legal notice, saying unfair competition was being created since those benefiting could offer property at a more competitive price since their tax was being 'forgiven'. 

This legal notice was discriminatory against honest taxpayers. It was even discriminatory among defaulters since only those who could dispose of property could benefit.

Tourism Minister Clayton Bartolo insisted the legal notice was part of the COVID measures to help companies with cashflow problems to settle their taxes. 

In his address, Bartolo spoke on the way the government had given €20 million in support to the tourism sector to help it through the COVID crisis.

Incidentally, he said, Nationalist MP David Thake, who had €800,000 in VAT due, had sought to make use of tax deference measures given by the government during the COVID crisis, even though his companies actually did not qualify, not least because the tax due went back as much as 10 years.  

At the end of the sitting, the Opposition protested that the Speaker had declared that the motion had not passed, when no one said anything from the government benches.

The Speaker was not part of the government, Opposition whip Robert Cutajar said.

The Speaker said the numbers were what they were and the Chair had followed the usual procedure, despite further Opposition protests.