16 February 2005

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Incentivise the honest taxpayer
The decision by the government to waive all VAT penalties and additional tax imposed in line with the VAT Act is welcome news. It certainly should encourage operators to get their VAT house in order. It will also have the added value of easing government’s cash flow.
To this extent the scheme is a win-win situation which should see the operators happy to regularise their position and government with increased revenue.
We cannot however help but comment on the growing culture of fiscal amnesties being granted. The immediate net effect of many an amnesty is to see a growing discrimination developing between law-abiding taxpayers and persons who remain unable to meet the legal deadlines for paying their dues. One imagines many a law-abiding tax payer being aggrieved that his prompt payment leaves him in no advantageous position vis-a-vis a competitor who pays late and manages to get his penalties waived. It is all being done with the blessing of an administration which is cash strapped. It may be seen as a sensible commercial decision but it will certainly discourage those that pay promptly. What is urgently required is an incentive scheme that rewards prompt payers as has been done in the case of telephone bills by Maltacom where a three percent discount is being offered to persons paying on time. Maltacom is to be lauded for this initiative.
The emphasis must remain on encouraging people to pay on time and not giving a break to persons who pay outside the legal time frame. There have been too many occasions when persons operating outside the system have been advantaged by the authorities.
While these schemes have been positive insofar as that they have seen substantial funds repatriated and or starting to be subjected to fifteen percent withdrawal taxes, little has been concocted to encourage people to work within the system.
There is much that government may want to consider in this regard. A scheme could be created where those engaging in property maintenance services are encouraged to ask for a VAT receipt from the providers. No such system exists currently since by not asking for a VAT receipt one saves the additional eighteen percent VAT.
Something drastic needs to be done here.
Government could also find a way of making renovations in private houses tax deductible up to a certain value.
This too would encourage persons to spend, which is a sure way of kick-starting the economy. Government could also use its good offices to encourage the commercial banks to reduce their interest rates which are crippling many a house purchaser. This is all the more relevant when one appreciates the very low savings interests being offered by the banks.
The central necessity for any growth in the country is the appreciation that leaving more money in people’s pockets will ensure spending increases. This can only be achieved if government taxes people less. The policy of reducing taxation as a method to getting people to spend more has become the mantra of all modern European governments. Regrettably the trend in our country is increasing taxation and inventing new methods to curb revenue earners. Too many new taxes are being introduced and at much the same time. Stricter controls, even on our motorists are simply being seen as an attempt to milk citizens and not aimed to increase discipline on our roads. All too often the simple motorist is being penalised while the infringements of bus drivers carry on unnoticed and unattended to.
It’s time to give the honest taxpayer a fairer deal.

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Editor: Saviour Balzan
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