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Dalli Defends Maltese VAT Hike

by Robert Lee,, London

27 November 2003

Maltese Finance Minster John Dalli has defended the decision to increase VAT (Value Added Tax) announced in his recent budget speech and fended off criticism from “short-sighted” businesses who say the move will add to costs and decrease levels of disposable income.

"We have a deficit which has to be reduced. A government can tax people directly or indirectly. It can take, or not give you. Both have the same effect on purchasing power but we strike a social balance,” said Mr Dalli according to a Times of Malta report.

"We know those who can afford to spend more and pay more VAT than those with lower incomes. The government has more sensitivity to such issues than employers," Mr Dalli stated.

The Finance and Economic Affairs Minister also countered suggestions that a higher rate of VAT will lead to a higher incidence of tax evasion.

"We have to strengthen the enforcement and management at the VAT department. The systems are in place and they work. We just need people who are able to interpret the information that exists. There is substantial tax evasion and I believe it pays to invest to ensure we get the money due," Mr Dalli said.

Dalli remarked that heavier fines as punishment for tax evaders was one solution to the problem.

“We know we can improve the tax collection systems and when we did the opposition criticised us because we collected more when, in reality, we increased revenue through efficiency and not because we increased taxes," Mr Dalli observed, according to the Times.

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