MTCA: a transformational change
Commissioner for Tax and Customs Joseph Caruana is under no illusions about the importance of transforming the Malta Tax and Customs Administration: the changes would tackle an impressive 80% of the objectives outlined for financial services in the strategy launched in March 2023 by the Malta Financial Services Advisory Council.
However, he is adamant that the transformation goes well beyond the financial services sector and that the Administration's Strategic Plan for 2023-2025 will affect all taxpayers.
"What we are doing now will bring the Administration in line with OECD standards – the Tax Administration Forum 3.0 – which involves a new approach: moving from 'voluntary compliance' to which is 'compliance by design'," he explained.
One of the main rationales for the changes come from the integration of the main Revenue Departments into the Malta Tax and Customs Administration. It has been a long time coming: the merger has been on the cards since 2012, when legislation was enacted which amalgamated the positions of the Commissioner for Inland Revenue and the Commissioner for VAT. These two departments were merged and now Customs is being brought in. This created the impetus for an entire review, with projects covering a wide range, from the governance structure to the technology backbone, and from collection and compliance to the accumulation of defunct files.
Governance is an important thread running through the transformation: "We have already amended the law and will have a Board of Governors, which separates policy from operations. And the Commissioner for Tax and Customs has full independence in the administration of taxpayers," he said.
"We will have an audit committee that will be chaired by a member of the Board and are also working on compliance management. We have a risk management committee, designed with the support of the International Monetary Fund, which helped us to establish the terms of reference. We are in the initial stages but the intention is for risk management to encompass the four pillars: registration, filing, verification and collection."
The organisation also needed to be restructured to reflect the merger, which added 420 customs employees to the 412 tax ones. The director generals now form an executive committee while the Administration has also issued a number of calls to fill new or vacant headship positions.
Mr Caruana is full of praise for the work that has already been done over the past years: one metric stands out. In 2006, the notion of non-filers was introduced, representing a huge evolution. It was a breakthrough wherein at present more than 300,000 of the 380,000 taxpayers no longer need to file a return. These returns are being populated by third party information – all part of the 'compliance by design' approach – without taxpayers needing to stress about their returns.
"This is obviously very beneficial for taxpayers while, internally, assessors were able to shift their emphasis to those who do not self-assess," he said.
On deadline date for the submission of Income Tax Returns, the number of individual taxpayers who submitted their income tax return increased from 73% to 89%. The customer-centric approach has also enabled a 13% increase in the number of taxpayers who file their returns online and 53% individual taxpayers are now making their payments online.
"We need to continue investing as we are still working with different legacy systems which do not talk to each other. We have very capable and experienced officers but they need the right technological tools," he said. "This will be one of the key factors of the holistic transformation."
The Administration has issued a tender for an integrated IT system for both tax and customs, but it is already using emerging technology such as AI which will start to give results in the coming weeks.
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