Malta’s Government Deploys Advanced Tools Against Tax Evaders

A significant new bill was tabled in Malta’s Parliament, aiming to overhaul the enforcement and recovery mechanisms within the country’s tax framework. Introduced by Justice Minister Jonathan Attard and backed strongly by Finance Minister Clyde Caruana, the legislation reflects the government’s escalating commitment to improving tax compliance and closing the enforcement gap.

The core objective of the bill is twofold: to strengthen enforcement against fiscal evasion and to create a statutory pathway for out-of-court settlements of tax arrears. Minister Caruana made his intentions crystal clear: tax evaders can expect to be pursued rigorously, stating that the government would “come down on them like a ton of bricks.” This is not mere rhetoric—recent legislative reforms have already doubled the interest rate on overdue tax to 7.2%, and banks now require clients to present a clean tax compliance certificate before extending credit facilities.

A key feature of the new bill is the establishment of formal mechanisms through which taxpayers may resolve tax disputes without going through lengthy court procedures. The bill empowers revenue departments to enter settlement agreements with taxpayers and introduces severe penalties for those who breach these agreements—ranging from hefty fines (up to €2.5 million) to imprisonment of up to four years. The changes will apply across Malta’s major tax laws, including the Income Tax Management Act, VAT Act, and Social Security Act.

Modern Compliance Tools, Broader Reach

According to Minister Caruana, the Tax Compliance Unit has moved from assessing 1% of taxpayers to screening the entire taxpayer population using advanced analytics. As a result, detection rates have soared, with 80% of those screened now being flagged for evasion. With over €33 million earmarked to further upgrade Malta’s tax infrastructure, the government’s capacity to detect, assess, and collect will only grow.

The message is clear: those who are non-compliant will face substantial consequences. Those who are honest and timely in meeting their tax obligations, however, can expect greater fairness and fewer competitive distortions in the marketplace.

Controversy and Opposition Concerns

Despite the bill’s focus on efficiency and enforcement, it has not been without controversy. Shadow Finance Minister Graham Bencini criticized the bill as a “direct insult” to compliant taxpayers, arguing that it disproportionately benefits serious tax evaders by offering them an alternative to criminal prosecution. According to Bencini, the legislation fails to distinguish between intentional fraud and financial hardship, and may reduce the deterrent effect of criminal tax charges.

The opposition has committed to voting against the bill, arguing that it lacks proportionality and sends the wrong message to law-abiding citizens and businesses.

How CLA Malta Can Help

At CLA Malta, we understand that the evolving tax landscape can be both complex and intimidating. This new legislative framework, while intended to enhance compliance, also introduces significant risks for individuals and businesses with unresolved tax exposures or legacy issues.

We offer a comprehensive suite of services to help clients assess their current tax position, identify potential exposure, and—where necessary—engage proactively with the authorities under the new framework. Our services include:

– Voluntary disclosure and tax regularisation support
– Out-of-court settlement negotiations with revenue authorities
– Strategic advice on structuring payment plans and penalty mitigation
– Representation in tax audits, assessments, and compliance reviews
– Risk assessment for potential criminal and administrative sanctions

Whether you are seeking to validate your current compliance or are concerned about past liabilities, timely advice is now more critical than ever.

To discuss how the proposed legislation may impact you or your business, we invite you to reach out to our tax advisory team in confidence.