WATCH: Finance Minister in scathing speech about ‘changing culture’ in Malta on paying tax

Speaking on Monday night in Parliament, Finance and Employment Minister Clyde Caruana issued a scathing rebuke of the culture surrounding tax avoidance on the island, pledging to do all he can to change the status quo, increase the efficiency of tax collection and mordernise Malta’s tax department.

He was speaking during a discussion on a motion filed by the Opposition calling for are a repeal to a legal notice published by Government,

The notice, Exemption of tax from property transfers (set-off of tax arrears) Rules, 2021, states that those who have tax arrears that were due by January 2021 will be allowed to pay any tax due on the transfer of property purchased before March 2021 against their arrears and thereby be exempt from tax on property transfers to the extent that they are in arrears.

It was first announced in March 2021 as part of a raft of measures aimed at supporting businesses from a liquidity perspective due to pandemic-related disruptions. The legal notice about this specific measure was published in November and caused a wave of criticism by various organisations which said it effectively penalises those who pay their taxes on time.

In defending the legal notice, Minister Caruana spoke at length about the long-standing issues Malta has faced with paying taxes, ridiculing how, for example, when the time comes, the majority of businesses locally claim to have broken even or made a loss, following up with an incredulous: “Come on?!”

He revealed that nobody applied for this measure, and warned that those who did not apply thinking they will get away with not paying tax, should not be surprised when measures are introduced in the coming months to recover taxes owed.

The Minister also revealed that the Government is owed €5 billion in tax arrears and will not be closing an eye to it.

He said that he had and continues to have a decision before him, to either look the other way and accept the culture in Malta, or to work towards changing things.

“I am not the type to do nothing. For me, politics is not ‘my career’, it is a part of my career, and, that makes all the difference,” the Minister said in Parliament.

He went on to say that politicians’ place in the House should be “transitory”, not permanent, which is how the institution strengthens its ties with the country.

“If one seeks to safeguard their seat, they will try to do all they can. They will not just spend their time carrying out favours, but they will take action for the common good,” he said, in a nod to a sentiment echoed by fellow MP Oliver Scicluna.

Calling for maturity, he said nobody can expect for the approach to be the same, but have a different outcome.

He said that people want politicians who work for the good of the country, who “take the necessary decision”, even if it makes them unpopular.

“I am not here to be popular…I am here to do my work. If it is not good enough and I need to leave, so be it. I reason like this because it is not my career, it is part of my career, so I want to see that in my time as Minister of Finance, I start to see a change in culture.

“The change in culture needs to be in a way that like a citizen of Malta expects the best education, health and infrastructure, there must also be an expectation of efficiency in the collection of taxes.”

The Minister qualified that he is not speaking as somebody who is against business, and that it was not possible for him to be against the business community, otherwise, come budget time, he will not have the funds for the Government’s social measures.

He added that while he is not against business, he is absolutely against abuse, and those who believe that public funds are there as a means for them to grow their personal assets must end. He cautioned that “the Government is not an overdraft facility.”

Minister Caruana pledged to see that in the months and years to come, Malta’s tax department would become one of the most modern in the country. He said investment is not only required in human resources, but also in technology, the tax compliance unit, and the department needs to make sure that all units communicate effectively.

“Tax is not a punishment. It is there as it is a sign that somebody has earned their money.

“I must say, in the hour of need all those who found themselves on their knees and asked for help [due to the pandemic], found help.

“We cannot all, in the hour of need, be communists, and when there is success, suddenly we are capitalists. It does not work like that.”