'What's the difference between tax evasion and tax avoidance?'

What’s the difference between tax evasion and tax avoidance? When Denis Healey was asked this question he famously replied “ the difference between tax avoidance and tax evasion is the thickness of a prison wall”.

Many countries take tax evasion seriously. Probably the most famous case of tax evasion is that of Al Capone. “ The government can’t collect tax from illegal money” – was Capone’s dictum. Al Capone was wrong – in 1931 the court found Albert guilty of not declaring illegal money - money Capone had made from illegal activities such as gambling. Capone was sentenced to prison.

Other famous personalities found guilty of tax evasion include – • In 1987: Lester Piggott who was jailed for three years for tax evasion •Sophia Loren was actually imprisoned by Italian Courts for 18 days in 1982 for tax evasion •In 1999 Luciano Pavarotti was convicted of tax evasion and had to pay 10 million euros •Boris Becker was given a suspended prison sentence and ordered to pay €500,000.

I personally have never heard of anyone going to prison for tax evasion in Malta. Tax compliance in Malta is thought to be in the region of 65%. That is around 35% of tax due is not collected. In round figures, this translates to a loss of income for the country, exceeding €330 million euros every year.

Now no one can expect to have 100% tax compliance – but Nordic countries have shown that it is possible to reach 85% compliance on a consistent basis. I believe we could reach a more amicable “Mediterranean” target of compliance of 75% to 80%. This would still collect a further €95 million to €145 million to the Maltese Exchequer – a reduction of 40-60% of our annual deficit. That’s not a bad start.