Finance Minister Clyde Caruana has revealed that the Government has collected a €500 million more in taxes last year, when compared to the previous year, as increased enforcement on tax collection yielded results.
Speaking during a pre-Budget conference on Wednesday (today), he said that next year, the Government will collect an estimated €200 million more than it will this year, without even taking into account additional tax revenues from economic growth.
Dr Caruana attributed this increased income to the Malta Tax and Customs Administration’s (MTCA) efforts to increase tax compliance among businesses.
The MTCA was established in 2023 through a merger of the Government’s income tax, VAT and customs departments. The merger allowed information to be shared more freely between the departments, allowing the new entity to better assess the taxes due by businesses.
At the time, he said it marked “the beginning of a much-needed culture change,” having previously pointed out that, on paper, 70 per cent of Malta’s businesses were making a loss or breaking even.
The new MTCA setup made it easier for Government to go after tax cheats - a fact duly noted by many businesses, which started approaching the tax commissioner to settle their dues.
In his comments on Wednesday, the Finance Minister noted that while payment compliance previously stood at 40 per cent, it has now reached 85 per cent.
He highlighted that while in the past businesses held multiple agreements “without honouring them,” today businesses can only have one agreement per entity.
“This has led the Government to address this with quiet but firm resolve and oversee that what is due, is collected.”
Part of this effort includes a new AI system that has been used to analyse VAT returns. The system found that, notwithstanding the markedly higher tax compliance that led to the increase in revenue, some 40 to 45 per cent of businesses are not paying all the VAT they owe.
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