Tax deal compromises weaken rule of law, foster corruption, says Chamber

Malta’s Chamber of Commerce, Enterprise and Industry has waded into debate around media reports of “substantial tax reductions to tax offenders” that the Chamber says “set a very worrying precedent” when the country is “struggling to crack down on tax evasion”.

It comes in the wake of a report by the Times of Malta alleging that the €40 million tax bill owed by one of Malta’s wealthiest men, Charles Polidano had been reduced to less than €10 million.

In a scathing response via a press release by Malta’s Department of Information on Wednesday afternoon, the Ministry for Finance and Employment insisted that all dues owed by the developer will be settled, without a “property-for-tax swap”.

Additionally, it reiterated Finance Minister Clyde Caruana’s insistence that “the Government will ensure that tax dues are collected and tax evasion curbed”.

Subsequently, the Times has insisted that Mr Polidano received “received a 30 per cent discount on his pending dues, which date back to the mid-1990s, and also agreed to forgo payment for land he had previously agreed to sell to the Government”.

In its statement, the Chamber said that “any ‘deals’ to reduce unpaid taxes should be transparent and beneficiaries should be considered according to predetermined guidelines such as a result of economic constraints arising from the current pandemic”.

These “‘tax deals’ continue to weaken compliance with the rule of law and foster a culture of corruption”, according to the Chamber.

“Government and contracting authorities must promote a level-playing field among all economic operators and reward those who comply with the law, not only because it is the right thing to do, but also to safeguard the competitiveness of operators who comply with the law as against those who disrespect the law”, it added.

It is not the first time the Chamber has identified shortcomings in the enforcement of Malta’s tax system.

Earlier this year, it published its “Public Procurement Reform” calling on the authorities (namely the Department of Contracts and the Inland Revenue Department) to create systems of seamless integration which would automatically flag economic operators with “no pending social security payments, tax arrears and if no settlement agreement is in place”.

The “near absence” of blacklisting in Malta and the “inadequacy” of the current mechanism has been repeatedly cited by the Chamber as a matter of concern which should be addressed as a “priority” in public procurement and good governance. 

The Malta Chamber intends to fiercely advocate for the implementation of the reforms proposed while maintaining an open and constructive dialogue with all relevant stakeholders, it concludes.