28 March - 3 April 2001

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Benchmarking expected to up tax revenue dramatically

There is an air of confidence wafting toward the Tax Compliance Unit, as details of the benchmarks for the first professional classes are concluded.

However, what will surface is expected to send shock waves throughout Malta's professional community. Namely, it will unravel the oceanic discrepancy between declared income and real income.

The Business Times has taken five professions and made calculations based on their relative income and has compared them with their declared income from a survey carried out by The Business Times itself.

From the investigations carried out by The Business Times, the discrepancy between declared income can vary as much as a staggering 300 per cent and the total tax sum avoided would normally be equivalent to the entire amount declared to the Inland Revenue Department.

The benchmarking exercise is expected to send out a wave of concern among the professional classes, which will naturally approach the problem by presenting more realistic revenues.

The down side to this is that, while tax revenue is expected to explode, professionals may offset their habit of minor tax evasion by upping their price tags – a move that will undoubtedly lead to higher consumer prices.

But with tax revenue from the professional classes on the increase, the government may very well start considering loosening up on the salaried classes - an observation confirmed by the finance minister during a parliamentary debate on Monday.

The Business Times survey:
Medical consultant
A medical consultant would, on average, view 15 patients a day for 4 days a week, for 48 weeks a year. Each patient would be charged an average of Lm15.

The real income would amount to around Lm43,200.

Most medical consultants declare an annual income of Lm10,000 on average.

Discrepancy: Lm33,200
Rough tax avoided: Lm11,620

A lawyer would, on average, view 15 clients a day for 5 days a week, for 47 weeks a year. Each client would be charged an average of Lm10.

The real income would be amount to Lm35,500.

Most lawyers declare an annual income of under Lm10,000.

Discrepancy: Lm25,250
Rough tax avoided: Lm7,200

A painter/plasterer would have one job a week, for 47 weeks a year. Each job would bring in an average revenue of Lm600 a week.

The real income would be Lm28,200.

Most painters/plasterer declare an annual income of under Lm6,000.

Discrepancy: Lm22,200
Rough tax avoided: Lm6,400

An electrician would normally take one job every three days, while he would work 320 days. Each job would bring in an average of Lm300
The real income would average Lm31,900
The declared income is normally under Lm6,000
Discrepancy: Lm25,900
Rough Tax avoided: Lm7,300

A hairdresser would have 15 wash, cut and blow dries a day, 6 days a week for 47 weeks a year. Each would cost Lm8 on average.

The real income would be Lm33,840.

The declared income is around under Lm8,000.

Discrepancy: Lm25,840
Rough Tax avoided: Lm8,600.

The Business Times, Network House, Vjal ir-Rihan San Gwann SGN 07
Tel: (356) 382741-3, 382745-6 | Fax: (356) 385075 | e-mail: editorial@networkpublications.com.mt