European Commission estimates €241 million VAT losses, government differs

Ministry for Finance insists Malta’s VAT mechanism ‘one of the most efficient among EU member states’

The Maltese government is denying a report issued by the European Commission which estimates that the country’s losses from unpaid VAT rose from €47 million in 2000 to €241 million in 2012.

According to the Finance Ministry, the government’s own estimates point to a loss of €34 million in 2012 and less than €11 million in 2013.

In its report to the study to quantify and analyse the VAT Gap in the EU-27 member states for 2012, the European Commission argued that the VAT Gap in Malta saw a slight increase in 2012 from 2011, as a 3 percent increase in VAT revenues was in sufficient to keep pace with the strong increase of over 6 percent in the VTTL, in line with the nominal growth of the economy.

The VAT Gap in 2012, at 31 percent, places Malta among the countries with a high VAT Gap in the EU-26 surveyed in this update. The VAT rates were not modified during the course of 2012.

In a reaction, the finance ministry said it considered Malta’s VAT mechanism as one of the “most efficient” among the EU’s 28 member states.

In 2013, Malta collected 8.1 percent of GDP in VAT revenues, a record percentage, in spite of how VAT rates have remained stable at 18 percent.
In 2013, Malta collected 8.1 percent of GDP in VAT revenues, a record percentage, in spite of how VAT rates have remained stable at 18 percent.

“This goes completely contrary to what was reported by the European Commission in its recently published report for 2012,” the ministry said.

It said that the ministry’s own estimates point to a loss of €34 million in 2012, and less than €11 million in 2013.

“The reason for this large discrepancy is that, from this year’s report for 2012, the Commission has included all the exported services supplied by the online gaming industry as non-recoverable  VAT, while in practice, this industry is, up to now, exempted from charging VAT,” it said.

The Ministry for Finance will also be communicating this clarification to the European Commission.

The finance ministry insisted that Malta was  at the top end of the list among the most efficient collectors of VAT.

“In 2013, Malta collected 8.1 percent of GDP in VAT revenues, a record percentage, in spite of how VAT rates have remained stable at 18 percent. This is also corroborated by the Commission’s previous report,” it added.

The Ministry added that the high level performance did not mean that tax evasion did not exist: “In fact, various administrative and regulatory measures are being introduced so that tax evasion is minimised further.”

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