Scicluna to move VAT amendments to reduce penalties and late-payment interest

New changes in VAT legislation will see the interest rate on tax dues decreased from 9% per year - an average of 0.75% every month - to as low as 6%.

The changes were announced by finance minister Edward Scicluna, who today toured the VAT department. The exchequer is expected to collect €580 million in VAT revenues in 2013, which have so far not been collected.

Scicluna said the department had to ensure that bona fide taxpayers who regularly paid their VAT returns are not trapped inside a system that makes it impossible for them to pay what they owe, while "parasites"evade taxes without any consequence.

Scicluna also announced a capping on administrative penalties for late VAT registration, a revision that takes place in light of the merging of the Inland Revenue and VAT departments. The capping amount will be announced shortly.

The current system where interest due is paid before the actual tax component, will also be reversed so that taxpayers first pay the VAT element before any late-payment penalty and interest.

Scicluna said he will be presenting the amendments to the VAT law in parliament within a few weeks. "It will have a positive impact on government revenues, instead of seeing people resort to usury to pay back their VAT dues."