The timeframes within which the police may investigate and prosecute tax crimes will be widened as part of the government’s plans to get Malta off the FATF grey list.
At present, tax offences have a two-year prescription period, meaning the police and the taxmen have 24 months to take court action against alleged offenders before the crime becomes unactionable.
The government is planning to publish a legal notice to widen this prosecution window to at least five years, with the possibility of eight years also being discussed.
Penalties for tax cheats are also set to be increased by “thousands of euros”. The exact figures are still being hashed out, a source privy to the government’s plans said.
The proposed reforms will not be retroactive, meaning they will only cover crimes committed after the reform is made.
FATF action plan
The move forms part of the action plan of reforms Malta intends to present to the FATF next month. It is understood that the action plan is being finalised and is due to be presented to stakeholders shortly.
In June, Malta was placed on a list of untrustworthy financial jurisdictions, which the FATF calls the grey list.
The island has since signed an agreement with the FATF to bolster its fight against financial crime and it must prove it is taking that commitment seriously before it can be taken off the list.
At the heart of the plan is an improved commitment to effectively fight tax crimes by using intelligence to catch tax cheats and better policing of ultimate beneficial ownership rules.
Tax department sources have indicated that they were being directed to increase the number of tax investigations and files handed over to the police for further investigation. However, they complained of being hamstrung by the narrow window in which they can prosecute tax dodgers.
“With the current prescription period we can only take action against someone based on their last tax return... we can’t go any further back than that and this limits us,” one senior official said.
He added that even after the proposal becomes law, tax officials would still need “a few years” to build up a body of cases to take criminal action against.
Push to introduce a cultural shift
The source said that Malta was also being pressed to introduce a cultural shift in the way the authorities deal with tax breaches.
It is understood that international assessors from the FATF did not look favourably on the country’s approach to regularise the fiscal position of those who spend years out of line.
“We have a long-standing practice in Malta of issuing relatively minor administrative fines and allowing people to bring their affairs in order, even after several years of irregularities,” the source said.
“It appears that, since the greylisting, this will have to change.”
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