An Analysis of Revenue Collection

Today, the Auditor General – Mr Charles Deguara, presented to the Hon. Speaker of the House of
Representatives, the National Audit Office (NAO) Report entitled, ‘Ministry for Finance: An Analysis
on Revenue Collection’. The scope of this analysis, carried out by the Financial and Compliance
Section, was to collate and assess the revenue collected during 2016 with respect to the three main
revenue-generating Departments within the Ministry for Finance, namely the Inland Revenue
Department (IRD) – including the Capital Transfer Duty, the Value Added Tax (VAT) Department and
the Department of Customs (DOC). The NAO also enquired on the level of enforcement procedures
in place in relation to the collection of revenue, as well as the status of the integration between
these three Departments, necessary to strengthen and consolidate the Maltese fiscal structure. This
task was conducted through detailed research, meetings and analysis, where possible, of figures and
information provided through replies to various Questionnaires.

The five-year analysis conducted by the NAO indicated a €329.5 million increase in absolute terms in
Income Tax over this period, with the highest spikes in Capital Gains Tax for 2014 (25%), Provisional
Tax in 2015 (21%) and Duty on Documents and Transfers in 2015 (29%). A steady upward trend in
VAT income was also noted since 2012, with a total increase of €191 million. With regards to the
DOC, a €124.1 million increase in income was reported with particular increases in 2014 and 2016.

The most common enforcement tool used by the IRD was Remission of interest agreements in
relation to arrears of company tax and tax due by individuals, which contributed to the collection of
circa €4 million by end of May 2017. Similarly, the VAT Department entered into Remission
Agreements, generating €3 million. The DOC handled various Criminal and Civil Court cases, besides
issuing Letters to Prosecute, Seizure Notes, and out of Court settlements.

The NAO felt it is pertinent to reproduce a number of comments which were forwarded in relation
to the Departments’ respective staffing requirements, and recommends that due attention is given
to such requests.

This Report also outlines the various measures being implemented to support the adoption of the
merger of these Revenue Departments, which will ultimately simplify the whole tax system and
provide a better service to the businesses and public in general. These measures consist, amongst
other initiatives, of a consolidated Commissioner for Revenue website, a One Stop Shop, a Joint
Enforcement Unit, a Consolidated Debt Collection and a Call Centre.

The results of this analysis are comprehensively presented in the report in caption.