As the country awaits with bated breath to learn the details of the million euro fraud at the expense of the VAT Department, hundreds if not thousands of people who have had to pay exorbitant fines to the same tax collector or to the courts as a result of administrative neglect or failing, find themselves reliving the burning frustration experienced when they fell foul of the law.
The fines imposed by the courts at the behest of the VAT Department often exceed by far the fines imposed on people convicted of crimes involving bodily harm, robbery, rape or child abuse. If for any reason it is impossible for a registered taxpayer to file proper accounts no account is taken of the fact and fines are computed in full taking account of the full delay in filing a return whether or not force majeur such as the absconding of a business partner was critical factor. If such a situation prevailed over a number of years, the VAT Department proceeded in a mechanical way initiating separate prosecutions and securing a series of convictions amounting to many thousands of euros without bringing into play the fundamental reverse telescoping of criminal penalties in a continuous offence.
Unlike US jurisdictions where sentences can amount to a few hundred years of jail term, a continuous offence is regarded as a single offence and does not attract multiple punishments. Our VAT Department prefers a sliced bread approach cutting up a disaster into several segments to turn it into a catastrophe.
None of this is generally known since a tax liability particularly in the business community is regarded as seriously dirty linen and may cause grievous damage to the business itself apart from the loss of funds itself. The consequence has been a long series of private tragedies and effective bankruptcies of very small businesses. Since the banks are more than reluctant to grant loans for the payment of tax dues, there have been several cases of family members taking out loans to pay VAT fines for a father or a brother and becoming saddled with a long term liability and a loss of life quality for entire families. This too is completely undocumented.
As the human toll mounted and while the law remained unchanged it became ever clearer to the VAT Department that its draconian enabling law was causing far more harm to the community than it may have done good to the government’s coffers. Still there was no way out except in extremis to have resort to Presidential Pardons. The number of pardons applied of and granted should have militated for a serious review of the law and as far as possible a refund of some of the exorbitant fines exacted.
Instead the system has prevailed and the safety valve of President Pardons remains the only way out for the VAT Dept, the courts and above all for their victim.
What is fundamentally wrong with such an arrangement is that it remains arbitrary. Some people learn about the Presidential Pardon escape route and some do not. Many pay up where others are justifiably exonerated. Furthermore that grant of a presidential pardon remains at the full discretion of President nominally when in fact he acts on the advice of the Attorney General.
The possibility of abuse through the use of such discretionary powers is inescapable. Those relieved of a crippling fine may feel that they have been granted a boon by the sultan and remain obliged for all their lives, those who are refused the miracle may feel that they are being additionally punished for having no such intentions of political gratitude. Without anyone clearly making it out, the VAT system draconian and lopsided, depending on Presidential Pardons to reduce its greater excesses, becomes a threat to political freedom and a return to arbitrary law disguised under the cover of a meticulous accounting trail.
The collection of taxes to fatten private pockets is a heinous crime to be severely punished indeed but the imprisonment of a person who failed to file a zero tax return is an uncivilised absurdity. Many of the payments in such cases were extracted under threat of imprisonment, a tremendous violence on law abiding persons whose only crime was administrative neglect. The thousands of euro extracted from private pockets in this manner quite unrelated to any profit made or gain made is experienced as an unspeakable injustice, a medieval tax extortion often plunging into debt those who were happy eking a living without bothering their neighbours or depending on the state.
This is the context in which hundreds of people read about tax fraud allegedly perpetrated by VAT Department officials in collusion with some businessmen and quite probably their accountants and auditors. It is more than just a matter of scandal, it feels like injustice heaped upon injustice. Unless justice is done and very clearly seen to be done in this case, the public perception will be of total arbitrariness and an abandonment of the rule of law seriously affecting the liberty of citizens.
Whether or not the offenders are identified and brought to justice, a thorough review of the workings of the VAT enforcement system is required to render it user friendly in a Maltese context. It should be aimed at securing compliance rather than collecting revenue. In fact the more revenue is collected in the form of fines, the worse is the basic failure of the system.
