Non Filing. Taxation in Malta

Transcription

1 Non Filing Presentation by Mario R Borg Director (Operations) 30 November 2009 Taxation in Malta Historical Background Income Tax introduced in 1948 PAYE (1972) ID card number adopted as the individual tax registration reference (1989) Final Settlement System (1997) Moved to Self Assessment during a major Tax Reform Programme (1998) IRD online services launched (2002) Non Filing for certain taxpayer categories (2006) Future Merger with VAT (announced in last budget) EUPAN - Non Filing Presentation - Malta 2 1

2 Mission Statement 'The endeavours to provide taxpayers with quality and timely service, encourage compliance and simplify procedures. It also strives to ensure that taxpayers pay their fair share of tax and that taxes are collected promptly, whilst the cost of collection is kept low.' EUPAN - Non Filing Presentation - Malta 3 IRD Organisation Commissioner of [DG] Director Administration and Enforcement Director Operations Director Tax Audits and Compliance Director International Taxation Director Capital Transfer Duty EUPAN - Non Filing Presentation - Malta 4 2

3 IRD Environment Public Service Ministry of Finance Fiscal Policy Economic Environment Taxpayer Legislation EUPAN - Non Filing Presentation - Malta 5 Operational objectives Improve customer perception of the department and minimising administrative burdens on taxpayers Reduce internal operational costs Increase compliance (close collaboration with stakeholders and key users) EUPAN - Non Filing Presentation - Malta 6 3

4 IR Services Online Applications - Faster, Better, Simpler EUPAN - Non Filing Presentation - Malta 7 Re-engineering engineering the Backend VAT Common Database Registrar of Companies Employment & Training Corporation Automation of Taxpayer Registration EUPAN - Non Filing Presentation - Malta 8 4

5 The common database Public registry records available electronically Potentially the IRD may register any person attaining the age of 16 (statutory school leaving age) Unique ID card number that is also used as a person s income tax registration number All births and deaths recorded Who is married to whom? EUPAN - Non Filing Presentation - Malta 9 Tax Return Cycle Individual Taxpayers IRD collects third party information from Employment and Training Corporation, Employers (Statements of earnings), VAT Department, Banks and Financial Institutions (where Final Withholding Tax has not been paid), Other sources (Private Schools, Homes for the elderly, Host families, Child care), Stock Exchange. EUPAN - Non Filing Presentation - Malta 10 5

6 Third party information Importance of having complete, accurate and timely data from third parties Lists of third parties (from regulatory bodies) Discussions with third parties (Lack of legislation obliging such third parties to provide information) Involving third party data providers in providing a solution that is a win-win situation to maintain free filing (Employers, Language Schools, Banks, Private Schools and Child Care Centres, homes for the elderly) Data transmitted electronically Validations present at point of transmission (ID card with surname - CDB) Further checking at IRD (whether a person is registered for tax purposes) EUPAN - Non Filing Presentation - Malta 11 Risk Assessment Extensive risk assessment carried out based on data available to the department from different sources: Any CGT provisional tax payments? (IRD database) Employed or self-employed? employed? (ETC and VAT data) Part-time time or Main? (FSS and TA22) Any overseas employment or foreign income? (Past tax returns) Any children born after 1/1/2007 to women who returned to work? (CDB, ETC and employers) Determine Non filers and return filers EUPAN - Non Filing Presentation - Malta 12 6

7 Non Filer Initiative Applies to fixed income earners (employees, students and pensioners) Income arising from employment; Income arsing from local pensions; Income arising from local interest which has not suffered the final withholding tax of 15%; Income arising from transfers of immovable property that was subject to a final withholding tax; Income arising from dividends paid out by companies listed on the Malta Stock Exchange. EUPAN - Non Filing Presentation - Malta 13 Exclusions from the initiative Persons who are in receipt of trade or business income; are in receipt of rental income; had income from capital gains during the year, on which provisional tax was paid; are in receipt of foreign pensions; had income from overseas employment; derive income from foreign investments; received or paid alimony; may potentially benefit from tax incentives (e.g. tax credits to women returning to employment after having children). EUPAN - Non Filing Presentation - Malta 14 7

8 The Non Filing Concept EUPAN - Non Filing Presentation - Malta 15 Advantages of the non filer initiative Taxpayer no forms to fill in estimations avoided no penalties for late filing EUPAN - Non Filing Presentation - Malta 16 8

9 Advantages of the non filer initiative Department Cost savings in relation to previous simple tax declaration form Printing Mailing Processing costs (staff costs) Physical storage Environment (less paper usage) EUPAN - Non Filing Presentation - Malta 17 The Tax Declaration Was very simple to complete it only required disclosure of Changes, if any, in marital status number of sources of income supported by documentary evidence of taxpayer s income Child schooling the taxpayer s signature BUT It was also costly Form printing Mailing (original document, rejections and tax statements incoming and outgoing mail) Staff costs (form filling service, vetting, capturing number of sources) Other costs (storage and environmental) EUPAN - Non Filing Presentation - Malta 18 9

10 Declaration form process Declaration printed Vetting rejections (incomplete or invalid) acknowledgement issued tax determined on the basis of information held by CIR. number of sources matched electronically once sources match, tax statement is generated exceptions investigated and return issued EUPAN - Non Filing Presentation - Malta 19 Non filing Process Same concept of tax declaration retained except that: The tax statement is immediately issued on the basis of information known to the department Taxpayer is not required to file any tax form as long as he agrees with the tax statement EUPAN - Non Filing Presentation - Malta 20 10

11 Taxpayer Obligations To check tax statement for correctness Correction form Deductions not given Change in source (e.g. Main to part-time) OR Tax Return Other income to declare (e.g. dividends, foreign income) Change in Marital status (e.g. separation) Other Claims (e.g. exemptions and tax credits) If nothing is received from taxpayer, the Department considers that, for all intents and purposes of the law, the income for the year is as shown in the Tax Statement. EUPAN - Non Filing Presentation - Malta 21 Safeguards When new information is received by the department after a Non Filer statement has been issued and taxpayer failed to inform the department Consequences Tax return required Penalty for late filing Interest on outstanding tax worked out from the return filing date Any taxpayer may be subject to an enquiry EUPAN - Non Filing Presentation - Malta 22 11

12 Non Filers - Individual taxpayers Year Population Returns Non filers % N F Adjustments after N F Success Rate? , , ,625 56% 4,418 97% ,191 73, ,434 70% 4,107 98% ,033 71, ,345 72% Still in progress Composition of adjustments after Non Filer Statement Year Correction forms Returns ,735 2, ,657 2,450 EUPAN - Non Filing Presentation - Malta 23 Tax declarations Year Declarations Issued 174, , , , , , ,139 Declarations Submitted 97, , , , , , ,465 Submitted a Tax Return (failed to file declaration) 74,521 48,167 41,581 38,519 40,134 34,508 33,347 Failed to file declaration or tax return (Estimations) 2,486 2,359 2,684 3,023 3,563 4,199 4,327 EUPAN - Non Filing Presentation - Malta 24 12

13 Tax declarations cont Year % declarations filed % returns filed % defaulters % 43% 1% % 31% 2% % 25% 2% % 23% 2% % 23% 2% % 20% 2% % 19% 2% EUPAN - Non Filing Presentation - Malta 25 Lessons learnt Initially some taxpayers complained for being left out of the initiative we were very cautious with the risk assessment (e.g. Persons with no income for a number of years served with a tax return) Outcome we included persons in receipt of Social Assistance (exempt income)! Present main concern:-passive role of taxpayers: are taxpayers really checking the tax statement? is the data we get from third parties so accurate? (few adjustments and request for returns) EUPAN - Non Filing Presentation - Malta 26 13

14 We are still far from perfect and still make mistakes but nothing would be done at all if we wait till we could do it so well that it is faultless. The search for improvement is endless and the days of learning from experience are long gone by. Events are happening so fast that learning from continuous analysis, rather than experience, is a must. EUPAN - Non Filing Presentation - Malta 27 Thank you EUPAN - Non Filing Presentation - Malta 28 14