Merger Of The Revenue Departments Into One Entity
During October 2011, legislation was enacted for the establishment of the office of Commissioner for Revenue that will ultimately oversee the integration and management of the Revenue Departments namely VAT, Customs and Inland Revenue (including the Tax Compliance Unit and Capital Transfer Duty). The “Commissioner for Revenue Act”, Chapter 517 of the laws of Malta was issued on the 20th January 2012.
The integration of the Revenue Departments will strengthen the revenue streams and consolidate the fiscal structure of Malta to increase sustainability, which is essential in today’s rapidly changing economic scenarios.
The Revenue departments are three of the most important civil service departments in Malta. Together they deliver some of the most important functions for the Government, the public and the business community. Without their work, none of our public services could operate.
Their decisions have a direct effect on entrepreneurship and enterprise, and therefore on creation of wealth and jobs, particularly by small firms. We are convinced that by removing departmental barriers and focusing on the customer, the departments can make a step change in performance and efficiency. Our aim is to ensure that we are best placed to deliver the benefits of customer service, and of effective and efficient operations, to the country.
Mission / values of the Revenue Departments
To collect, in a timely and efficient manner, the amount of taxes due and to ensure that funds are available for Malta’s public services.
- By helping taxpayers understand and meet their obligations in accordance with the law.
- By simplifying procedures and minimising compliance costs.
- By regularly consulting our stakeholders.
- By developing a skilled and motivated workforce within a modern and adaptive organisation.
The options for change are being assessed against five objectives, which are consistent with the approach taken by academics, the Organisation for Economic Co-operation and Development (OECD), the International Monetary Fund (IMF) and the World Bank. These objectives are the following:
- Fairness, covering the need for an impartial tax system (an end in itself and because it encourages compliance), the use of the tax system to promote social justice, and the fact that taxes finance public services.
- Customer service improvements – improved service and minimised compliance costs.
- Presently compliance costs are significant and fall disproportionately on small businesses, many of which are customers of all departments and which have most to gain from a more coherent approach, for example to information and guidance, tax returns, and payment and debt handling.
- Effectiveness, involving maximising collection of the taxes required by legislation.
- Efficiency, and the related idea of productivity, refer to the rate at which inputs are transformed into outputs – further economies of scale should be possible.
- Confidentiality for taxpayers and other customers, which is central to maintaining confidence in the system.
Potential benefits from change
The potential benefits from change would derive from developing:
- More complete information and analysis to improve risk management across the tax system, potentially reducing the burden on the honest, and making life more difficult for the dishonest.
- Better and more flexible use of resources.
- A more focussed approach to compliance across the taxation system.
- Better deterrence. New arrangements would increase voluntary compliance, allowing greater targeting of the non-compliant.
Objectives and form of the integration
The integration will:
- Provide a platform for improved taxpayers services in line with the Taxpayers’ Charter.
- Provide an information sharing platform that will enable the Commissioner for Revenue to become more efficient and effective in fighting and deterring tax evasions.
- Be functionally oriented rather than structured by Tax type.
- Be cost effective in the process of merging the Departments’ functions.
- Be sensitive to the cultural diversity of the current organisations through the change management process.
- Issue one tax statement showing separately the tax due / refundable.
- Streamline the sanctions and penalty regime.
- Enforce and collect the total amount due.
- Provide for set-offs.
- Tax payer registration for Vat and Income Tax, payments and other online services.
- Better use of available information.
Information Technology Systems
The implementation of adequate Information Technology systems to support the integration and change management process is critical. Thus due consideration is being given to ensure that the departments’ IT systems will eventually provide a true picture of the taxpayer across the three organisations. This is a challenge that is being overcome over a number of phases.
At this stage interoperability between the VAT and Inland Revenue Departments’ systems is in progress. Interoperability is the shifting towards integration in common functions and consequently the two systems must converge to ensure that the information contents are synchronised. These tasks are critical. New systems are being procured while existing business systems and technology are being upgraded to change the current systems to ones that will support the new organisational structures and processes.
The current VAT and Inland Revenue Departments’ information systems projects are also focused on supporting both Departments independently of each other except for agreed interoperability areas such as tax return compliance checks and taxpayer registration validations. However both projects have within their scope, review of business areas and functions that are similar and for which one approach to implement the same application to support these processes may be initiated within the short term.
Top Management Structure
Posts in the top structure have been filled with existing Director Generals (DG), Directors and Assistant Directors.
Each Director General was assigned one of the following functions: DG (Operations), DG (Legal & International), DG (Compliance & Investigations), DG (Customs) and DG (Support Services).
A number of new posts have been created while some posts need to be filled with qualified professionals (I.T., Accountancy, HR, Law, Economics).
Senior Management officials within the Revenue Departments are continuously involved in the integration process. Various tasks force have been created, including the following:
- Legal Task Force.
- Compliance and Investigations Task Force.
- Data Maintenance Task Force.
- Debt Management Task Force.
- Call Centre Task Force.
- VAT-IRD Accounting System Analysis Task Force.
Premises for the merged entity
Currently, the various Revenue departments are located in different buildings in diverse locations mainly in Floriana and Valletta, with the exception of the VAT department, which is located at Ta’ Paris, Birkirkara.
The premises that will house the new organisation is expected to accommodate all the integrated departments in one common physical location. This location will be located in the central part of the island such that it is easily accessible to everyone.
Furthermore the new premises will be able to offer all the necessary amenities such as customer care, back office, training centre, child care centre and adequate parking facilities for both staff and the general public.
The amalgamation of all Revenue Departments requires changes in the respective Revenue Acts. The Legal Task Force formed by officials within the VAT and IRD departments is presently working on this.
- Sharing of information among Revenue departments;
- Integration and harmonisation of collection procedures (including set-offs);
- Alignment of interest, prescription period and penalties.
Below are some examples of areas which are being discussed with the objective of simplifying and ensuring as far as possible consistent application of administrative legislation:
- Appropriation system / Tax in dispute provisions.
- Short payment penalty (VAT Act).
- Period for recovery of tax, interest and administrative penalties.
- Tax treatment of (VAT) interest & penalties.
- Time limit for raising of assessments.
- Matters that may be referred to the Administrative Review Tribunal (ART).
- Records and Information.
- Rounding Up.
- Electronic Communications.
- Exemptions and reliefs under the Income Tax Act and the Duty on Documents and Transfers Act.
Coordinating tax policy making
One of the objectives of the integration is to make it easier to adopt a coordinated tax policy approach. Tax policy should aim to:
- Raise sufficient revenue for the funding of public services and macroeconomic stability.
- Control compliance and administration costs.
- Achieve a fair burden between taxpayers.
- Encourage enterprise and productive economic activity.
- Promote efficiency by addressing market failures.
Any changes should promote these aims. Currently, responsibility for tax policy advice is split between the respective departments. This makes it more difficult to meet the increasingly important need to ensure coherence across the tax system and with other Government policies.
Consultation Process with interested Stakeholders
Since the establishment of the Office of the Commissioner for Revenue, consultation meetings were held with interested stakeholders. These included Union representatives, Bank officials, professional organisations and other constituted bodies.
The process for the amalgamation of all Revenue Departments involves plenty of study and work. Together with the collaboration from all parties involved (the Government, all Revenue staff and stakeholders we look forward to implement the changes mentioned above in the very near future. The whole process is providing the opportunity to review existing legislation and operations with the objective of simplifying the whole tax system so as to ensure that compliance costs are reduced, the system is fair, and taxes are collected on time through better enforcement and ultimately provide a better service to the public and to businesses.