It is not known whether Tonio Fenech had another alternative to reporting the VAT fraud allegations to the police after a prominent businessman tipped him off on the sordid goings-on at the department. If he did have an option to bury his head in the sand, then his actions deserve to be praised for not pursuing that option. Anyone else in his position could have been tempted to hide the issue under the carpet and let the abuse carry on until it explodes in his successor’s face in years to come.
Details of the case have now surfaced, and 25 people are expected to be arraigned. Inspectors were bribed to waive garnishee orders, VAT account holders’ expenses were deliberately inflated and their signatures forged, some of the businesses implied were themselves led by the perpetrators to believe they would be receiving a fine for late renewal – and more money passed hands.
Meanwhile, VAT refunds came to a halt. It seems that the process to reinitiate payments restarted although many businessmen are still complaining about not having received their dues to date.
To add insult to injury, a court recently ruled against the VAT department’s imposition of an exaggerated 1 per cent per month interest rate on amounts under review by the VAT Appeals Board. The practice was described as legalised usury.
2009 has opened a Pandora’s box on VAT, and the car registration case is only helping to compound matters.
While we understand that Tonio Fenech also has the dire economic situation to worry about, it is also of utmost importance that he takes serious action to re-instill confidence in the VAT department. The Finance Minister has now pledged to mitigate matters by imposing harsher penalties on defaulters. While defaulting is certainly condemnable, the Minister’s plan of action seems somewhat wobbly. How does he expect to reinstate confidence in such an important office standing accused of sheer corruption by making it look tougher on account holders?
Because he blew the whistle, Fenech may find public support in being relieved from his accountability for the blunder. This does not mean nobody is accountable. Heads must roll, and we don’t mean just clerks. VAT department management must have known of the goings-on, and if they did not, they certainly should have.
Fenech may not be fully aware of the work awaiting him if he really intends spring cleaning the department, but it is unacceptable that the issue is taken lightly. Not only for political reasons, but also for the economic implications this carries – it is of paramount importance that businessmen’s minds are put at rest that they are truly contributing almost a fifth of their hard-earned profits back into national and EU coffers for their own end-benefit and that of the state. Even a slight suspicion of abuse in the VAT department will only lead to further promote the well-diffused practice of evasion as soon as the first opportunity arises.
Fenech must not focus on becoming aggressive with defaulters, but rather in increasing efficiency, create preventive systems to curb internal abuse, reform the manner in which the department is governed and instill the image of professionalism such an important state department deserves. In the short-term, Fenech must identify who is responsible for allowing this abomination to happen and take action accordingly. More importantly, he must ensure that refunds are given without further delay.