An AI system introduced to catch tax cheats has indicated that "at least 40 to 45 per cent of businesses" are not VAT compliant, Finance and Employment Minister Clyde Caruana said on Wednesday.

He spoke during a pre-Budget consultation conference held in Rabat on 18th September. 

He remarked that while this figure did not come as a surprise, the percentage was a clear indication of evasion and that the Malta Tax and Customs Administration (MTCA), formerly referred to as the Department of Tax, will keep up its ongoing efforts to address it.

The AI system formed part of a tax reform announced in May 2023. At the time, Minister Caruana noted that the reform marked the beginning “of a much-needed culture change.”

The system has multiple features aimed at efficiently running daily analysis of the wealth owned by people and companies and matching it with their declared income. It automatically alerts authorities when an individual or a company declares income that does not align with their accumulated wealth. 

Dr Caruana hailed the department for diligently collecting €500 million in due taxes between 2022 and 2023, “without blowing its own trumpet.”

He recognised that during the period, Malta was recovering from the pandemic and so many businesses and individuals were updating their payments.

Furthermore, he forecasts that this year Government should have a tax-based income of €200 million, “that is not based on economic growth.”

He attributes this income to the MTCA’s efforts to collect what is due to the Government. He reiterated that while the number of outstanding issues and queries by the tax department is being decreased, compliance is being strengthened.

Expanding further, the Minister noted that while payment compliance stood at 40 per cent in the past, now levels have reached 85 per cent. Here, 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.”