17 November 2004

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No more ‘Us and Them’ where tax is concerned

The US and Them mentality in the administration of fiscal legislation should be abolished and representatives of the government and the taxpayers should co-operate, at a strictly professional level, to implement what the people, through their representatives in Parliament, have decided, Parliamentary Secretary in the Ministry of Finance Tonio Fenech emphasised as he addressed the latest seminar held by the Malta Institute of Taxation (MIT).
Mr Fenech continued that certain measures in our fiscal legislation may appear to be draconian in nature, but sometimes these are necessary so as to remove the temptation to defraud the public purse. “One cannot accept, however, measures, or excessively draconian implementation of what the Maltese Parliament has legislated upon,” Mr Fenech emphasised.
When commenting on Malta’s membership of the European Union, Mr Fenech said that like any other type of relationship, the success of our membership involves assiduous work. This is not a one off occasion and just like a marriage, our efforts have to be of an ongoing nature.
The Parliamentary Secretary ended his address by appealing for the highest level of professional standards in the field of taxation, both by the collectors of taxation as well as tax advisers. He lauded the Malta Institute of Taxation for its Code of Ethics, which, in his opinion, leaves little to be desired.
When opening the seminar, the Institute’s president, Edwin Vella, referred to the 10th Anniversary of the Institute’s constitution which will be celebrated appropriately in the coming months. Mr Vella emphasised the importance of tax practitioners in the development of a modern economy. A well planned and well regulated tax regime is vital to the Government’s efforts in tapping the economy for the means to run the country.
During the past 40 years, Malta has made significant progress in its drive to modernise its economic and political structures. It must be appreciated that after millennia of constitutional and political impediments, this was no easy task, especially when one considers that for a number of years we had lost our way in a quagmire of theories and practices that had long been discarded elsewhere.
When touching on our European experience, Mr Vella stated that this does not only mean the importation of European requirements and practices. Malta has much to teach our European neighbours and, in fact, he quoted from the Institute’s own experience when the German equivalent seemed to have taken the Malta Institute’s own Code of Ethics & Conduct as a basis for drafting its own.
When touching on the local front, Mr Vella expressed the Institute’s serious preoccupation on various issues. The question of retrospective tax legislation was one of the most serious. The Revenue Departments in Malta cannot correct their own past errors through the passing of retrospective legislation. “Retrospectivity creates uncertainty and this is creating serious impediments to investment in our economy, especially where foreign investors are concerned. It is also unfair on the taxpayer,” stated Mr Vella.
Another of the Institute’s preoccupations is the Appeals Tribunals. The constitution of such tribunals, their membership and their preparation in taxation issues need to be given more careful consideration.
Mr Vella also invited the Revenue Departments to be creative and pro-active in their attitude and look at how other countries have regenerated their economies through innovative fiscal measures. Areas that need immediate action include pension funds, investment and finance leasing. The attitude of the Revenue Departments whereby they VETO all recommendations coming from outside sources aimed at regeneration for the simple reason that, in the short term, these may result in a slight reduction of tax revenue, has to be reversed and a more progressive outlook taken.
Mr Vella also challenged the Revenue Department’s right to make binding interpretations of the law. What Parliament has decreed, only our law courts can interpret and no one else. Giving the right to any department to interpret what our representatives in Parliament have decreed is bad legislation and should be removed at the earliest possibility.
On a more positive note, Mr Vella announced that MIT has commenced work on the drafting of the Taxpayer’s Charter which hopefully, when finalised, will be presented to the relevant authorities for their input and final implementation. Such charters are a way of ensuring an acceptable ethic whereby the conflicting interests of state and its citizens are to be regulated.
The seminar was also addressed by three speakers. The first, Dr Silvio Cilia made a very informative presentation on the role of the European Court of Justice in the Shaping of EU Fiscal Jurisprudence.
The second speaker was David Ferry who gave an overview of the provisions for the refund of VAT to Taxable Persons Established outside.
Dr Stefan Patrick Gauci gave a detailed presentation on the legal provisions governing the Relationship between the Taxpayer and the Revenue under the Income Tax Legislation.

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Editor: Saviour Balzan
The Malta Financial & Business Times, Newsworks Ltd, Vjal ir-Rihan, San Gwann
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