Tax evasion nation: Only 40% of companies declared a profit in 2019

Clyde Caruana says tax collection efforts have been stepped up to ensure that everyone pays their dues

Finance Minister Clyde Caruana
Finance Minister Clyde Caruana

Malta has a tax evasion problem, highlighted by the fact that in the last year before the pandemic hit, less than half of companies declared a profit, Clyde Caruana said.

The Finance Minister said in 2019, despite economic growth averaging around 6%, only between 35% and 40% of companies declared a profit. The rest either broke even or registered losses.

He was speaking on Friday during a question and answer session organised by the Times of Malta, moderated by journalist Ivan Martin.

Caruana said there is an “element” of Malta being a nation of tax dodgers using the 2019 example to illustrate the problem.

The minister has repeatedly emphasised the need for everyone to pay their dues. He said that since 2019, the tax authorities had increased tax collection efforts, including policy changes making it easier to collect dues.

During the unveiling of the pre-budget document last week, Caruana said that from 1 September the interest rate on outstanding tax due from now onwards will increase.

On Friday, Caruana said the improved tax collection efforts have yielded hundreds of millions of euro every year to state coffers.

GWU president Victor Carachi pointed out the unfairness of the situation: after all, even the 60% that did not declare a profit in 2019 received the COVID benefits.

The minister said the country’s entire culture had to change, acknowledging that “there is an element” of a nation of tax dodgers within us all.

Asked by ADPD chairperson Carmel Cacopardo about the millions in taxes owed by the two major political parties, Caruana said one of them had signed on to a payment plan and is settling its dues in instalments. He did not identify the party that has entered into a tax agreement.

The discussion on tax evasion became more pervasive during the pandemic when government forked out millions of euros to keep businesses afloat and workers in their jobs. The same is happening now with government expected to spend in excess of €1 billion between this year and next on subsidies to keep the price of energy and cereals stable.

Caruana has pledged not to raise taxes or introduce new ones in the coming budget but during a meeting of the Malta Council for Economic and Social Development said emphasis will be made on tax collection.

The minister said on Friday that the country had enough potential to collect the revenue government needs without changing existing tax rates or structures.