Daphne Caruana Galizia told to pay €101,000 in unpaid VAT

Malta Independent columnist Daphne Caruana Galizia has been called on by the VAT department to pay €101,194 in outstanding Value Added Tax, after a tax audit on her earnings from 2004 to 2012 produced an estimate of €562,191 in undeclared sales from the production of magazines for Standard Publications, among other sources of revenue.

According to court documents, the columnist is facing tax assessments on both income and VAT declarations.

A bank deposits test exhibited in court by the VAT department registered a total of €1,013,883 in deposits into Caruana Galizia’s bank accounts over the past decade, of which €320,000 was drawn up as an estimate by the tax audits section for the years 2004-2007.

The VAT department has estimated that the excess deposits excluding VAT amount to €562,191 and is calling on the columnist to pay 18% on the sum.

No action taken in 2007

According to the court documents, the director of VAT said that between 1999 and 2013, Caruana Galizia submitted 13 tax declarations that had missing earnings.

In 2007, the department twice informed Caruana Galizia to file correct returns and even threatened her with criminal action, although it is not clear what action the department took.

In 2012, the department again wrote to Caruana Galizia demanding a €20,762 payment and also instructed the Tax Compliance Unit to draw an assessment. On 14 March, 2014, the TCU informed her of the estimate for her unpaid VAT and a review was then carried out in April.

The TCU’s tax audits section drew up a schedule of revenues from what it said was “undeclared employment income” between 2003 and 2004, Taste Cooking School, and bank deposits between 2008-2013.

Under her contract with Standard Publications, Caruana Galizia – who has traded as Proximus Publishing – paid the publishers of the Malta Independent half the net proceeds of advertising revenue for Taste&Flair Magazine, less printing costs.

Contesting ‘unfair’ assessment

Caruana Galizia is contesting the estimates, saying they were not drawn up “properly, reasonably or fairly” and that they are based on “an incorrect appreciation of the facts”.

She has argued that not all deposits constitute income, they include also money from her husband to pay household bills; transfers from overseas organisers; libel damages; sale of unwanted furniture; gifts; and also return of monies owed to her by family members.

She has told the Tribunal of Administrative Review that the VAT Department has treated all deposits made into her sole bank account as taxable supplies.

Caruana Galizia has argued that she has one current account that she uses for both personal and work-related transactions – including revenue for the production of Taste&Flair magazine for the Malta Independent, as well as payment for her newspaper columns; and for costs incurred in the production of the magazine.

Caruana Galizia protested the assessment since she has been unable to assemble documentary proof of the personal and work transactions she carried out over the past 10 years within the three-month period demanded by the VAT office.

“Even if creating and keeping documentary proof of all non-work-related deposits going back over a decade were mandatory… this would still not address the issue of the bulk of those deposits being a portion of revenue from advertising sold by Standard Publications and transferred to me, as per contract, for the reimbursement of third parties involved in the production of the magazines, and for settlement of other production-related costs.”