There are too many tax evaders and practically little or no enforcement. One of the reasons seems to be that tax rates are too high. There is then the frustration of those who are employed because they sense they are the only ones paying their tax dues as the system has them by the balls. It is not a level playing field. I suggest Malta reviews its tax system to make it fairer and more equitable. High rates of income tax are known to put off many from declaring their full income. There have been innumerable times and methods over the past 60 years to address this shortcoming but CIR inevitably always failed. Enforcement has been lacking and when done, very expensive. In my opinion the exchequer’s emphasis on income tax should be reduced but compensated by better direct taxation. Lower taxation is in fact the main reason so many foreign corporates set up shop or a holding base in Malta, to benefit from a highly discounted tax regime. This clearly has raised the angst of those countries which have seen the flight of so many companies purely for tax purposes. To the extent that remedial action is now proposed at international level to halt this practice by establishing a minimum tax threshold and harmonization. Malta should be looking at a minimum tax regime as well. A minimum that would apply to personal and corporate bodies alike including foreign ones. The quantum would have to be worked out to balance the crest and troughs obtaining with the different categories. Income tax compliance is a problem especially with self employed persons. So many are unreliable and it is very expensive and cumbersome for any government to address it. A reasonable flat income tax rate may be the solution. Tax Equality may reduce the need to evade. A tax harmony with all corporates including the foreign ones. Some would argue that a leaner tax regime would equate into a better income to government as payers will sense an acceptable and equitable win win situation. But should a fall in income to the coffers ensue it will need to be offset by a compensating increase elsewhere. Inheritance tax and VAT direct taxation come to mind as fairer and more effective avenues.
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