'What's the difference between tax evasion and tax avoidance?'

l Capone used “Albert” as a pseudonym on many occasions He preferred Albert – the name he gave his own son --- to his own name Alphonse He often received illegal money under this pseudonym Albert This technique is used in a variety of ways --so that one can stay below the Radar screen A bank account held in a name that is not registered as a company can remain below the radar screen provided tax is withheld at source (15%). Next you will want the account number --- I have published it before. Pseudonyms are dangerous Ps Albert hated the name Capone for obvious reasons and changed his surname to Francis which was his second forename. Al used a Medical Doctors office and hid his “ business” papers in patients notes. < strong>We can still teach the Mafia a thing or two here < /strong> Regards take care Frank Portelli

Al Capone used “Albert” as a pseudonym on many occasions He preferred Albert – the name he gave his to his own name Alphonse He often received illegal money under this pseudonym Albert This technique is used in a variety of ways --so that one can stay below the Radar screen A bank account held in a name that is not registered as a company can remain below the radar screen provided tax is withheld at source (15%). Next you will want the account number --- I have published it before. Pseudonyms are dangerous Ps Albert hated the name Capone for obvious reasons and changed his surname to Francis which was his second forename. Al used a Medical Doctors office and hid his “ business” papers in patients notes. < strong>We can still teach the Mafia a thing or two here < /strong> Regards take care Frank Portelli

Alphonse G Capone. Does anyone wonder why the government doesn't go all out to collect all taxes it is owed?? Be it income tax or VAT? Why is it so hard for the ministry of finance to do its job??

with your take on the medical profession. Things are going (have gone) out of hand in that sector. I once again applaud your stand on this issue because no one in Malta has the guts to call a spade a spade.

Dear Danny I agree with you on many points - especially on striking a balance – and on ensuring that Government spending being efficient. On the other hand I have seen vast amounts of money from “commissions” and other “incentives “evading the tax system. The medical field is booming with tax evasion I think I know a thing or two about the medical area: - here are some facts. • Some Doctors are accepting bribes for operating patients in Government Hospital • Some Doctors accept bribes from Pharmaceutical companies for prescribing particular products • Some Doctors accept bribes from Pharmaceutical companies for using particular products in hospitals • Some Doctors demand bribes from private laboratories and from private hospitals • Some Doctors give bribes to other doctors for referrals • Some Doctors demand a commission from Consultants and at the same time a commission from private hospitals Of course not all doctors do this It started with one or two rotten apples ---- but it is progressing at an alarming rate - because we are not doing anything about it. This is just one field, which by my estimate, is on its own costing the economy not less than 20 million euros every year The shadow economy proliferates because it feeds on itself – of necessity - because undeclared money remains undeclared. We could collect between 95 million and 145 million euros from various other fields ---without becoming a police state. Do we have enough systems in place? I don’t think we do How else can you explain that banks do not ring alarm bells when large sums of money flow in and out of a bank account? That is why I proposed a Czar The alternative is down the Greek road. I will start a new blog on Danaos Thanks and very interesting Regards Frank Portelli

Dear Dr Portelli, What I am trying to emphasise here is the balance that needs to be struck in managinng an economy. You keep equating money supply with economic activity and somehow or other you seem to suggest that said activity is the result of a black economy. 1. Money supply is created up front as a result of bank loans. Therefore deposits invrease as a result of bank loans while economic benefits will accrue years downn the road. 2. It would surprise me if monies going into say bonds are geerated from the unofficial econnomy considering that Bonds are listed on the exchange. 3. I have the impression that the financial system has a very effective international screen that prevets earnings from the unofficial economy to enter the system. In conclusion, the balance that ust be struck includes 1. Efficient spending by Governnment. An inefficient Government chasing taxes will take us to the robin hood days. 2. Strong performing economy that relies on efficient players in the market and efficient government 3. fair tax rules that removes any moral grounds for tax evasion 4. Efficient tax collection system. If we chase only 4 it would be like a healthy heart policy that focuses only on heart transpants and ignores healthy diet, exercise, life style and monitoring :) Thanks for a vibrant discussion. re: spin, i am sure that you believe in what you say. Yet others know the teachnical aspects of money supply yet continue to spin the flus fl-idejn. If you want to know more about money supply and how governments (all governments) boost their economies pre election you may perhaps want to read The Cash Nexus by Ferguson. Warm regards

Dear Danny Today --between blog entries --- another 7 Million Euros of secured notes were issued and oversubscribed by 100%. http://www.maltatoday.com.mt/news/business/%E2%82%AC7-million-in-izola-bank-secured-notes-oversubscribed Last year --- in spite of the of € 810 Million Bonds issued and oversubscribed by Government and private companies ---one bank still managed to increased its deposits by another 140 Million Euros in spite of the low level of interests being offered. I maintain that there is a huge Shadow Economy - because I have seen it at work. I see this shadow economy as the greatest financial challenge this country faces. Of course there are local companies and individuals who are going through a hard time. But this is the more reason why we should be tackling this black economy. I am certain that we can do more to collect Tax due. That is why I proposed a Tax Czar. Rest assured I am not spinning A Tax Czar would ensure that Banks perform their duty of due diligence of KYC -- Know Your Customer --- to ensure that their customers are being compliant with the law. A Tax Czar could investigate how individuals can hide behind an “entity” which is not registered as a company but nonetheless can process millions of euros of income in a bank account --- and can distribute this income in an elaborate scheme to evading tax. A Tax Czar would ensure many things. Timeo Danaos. Thanks Frank Portelli yes by the way there is a method to simplify Heart Transplant operations but we had better not go into that

Dear Dr Portelli, Some brief comments on your latest thoughts: 1. Economic growth since Government’s aggressive tax-collecting measures: 2001 1.6% 2002 2.8% 2003 -0.3% 2004 0.7% 2005 3.9% 2006 3.6% 2007 3.8% 2008 2.1% 2009 -2.00% (also influenced by global recession) 2. Take-up of bond issues is not a reflection of economic growth (both official and unofficial economy). I know that this is used for political spin tipo flus fl-idejn, but the take-up of issues is part of the money supply mechanism and confidence and nothing much else. A significant chunk of bond issues you mention is moreover roll-over. The number of participants is also low (say 4,000 participants on average) that includes institutional investors. 3. Key indicators re health of economy are, inter alia, gainfully occupied as a percentage of population (you will find that the participation of females in the economy is among the lowest in the eu), export performance of goods and services, etc. An attitude by Government akin to standard kitchen chatter that il-bussinessmen print money and they should be taxed through their noses is very counter productive. Tax collection never works at 100% because it will just stall the economy while tax-xollection performance must be seen against a background of how fair are the tax-xollection rules in any given country. Those with ears to the ground beyond the core of businesses that really earn significantly, you will find a majority that scrape it from day to day. Hence Government should not talk just about tax collection but about its own efficiencies. There exists consensus that government is not efficient at all (understatement).

Simplify! Simplify! ~ Thoreau I agree with your point that tax collection must be fair and should go hand in hand with good governance. In our tax laws there is ample space for legal tax avoidance. I don’t think you are correct when you state that our economy started slowing down a few years ago. The problem with our economy is its’ Shadow. The “Shadow Economy” In the last 15 months €1.1 billion euros of bonds were issued and oversubscribed within minutes. In 2009 --- € 810 Million Bonds were issue by Government and Private Companies and these were oversubscribed within minutes. In the first 3 months of this year (2010) €297 Million Bonds so far been raised ---- often oversubscribed ithin minutes of the bonds being issued Yet bank deposits remain in excess of 9 Billion Euros I don't think further comment is necessary. regards Frank Portelli

So many aspects to consider-will mention just two: 1. The slowing down of our economy started a few years back when Goverment introduced scehemes and measures to collect more tax (that included tax that had been evaded). Increased Government revenue was not, unfortunately complimented by Government measures to improve its own efficieny. We in fact experienced a second major pre-election budget in a row even though global recession had not yet hit markets. My opinion -Tax collection must be complimented by proper observance of basic goverance principles that, sadly to opine, has been lacking for a long while now. 2. Tax rules must be seen to be fair. Example, a company makes a taxable profit of 100,000 yet all profit was applied to fund more debtors, stocks and to keep its machinery up-to-date. In reality, therefore, all of the 100,000 were needed by the business to stand its ground. Yet this business must still pay Government 35,000 that it must fund from sources other than its profits. This is an example how the application of tax rules harm business. Only a fair system provides a moral ground for Goverment to chase tax collection.

You are Correct Manwel Tax Czars operate all over the world – you will find them operating from the City of New York all the way to Korea. regards Frank Portelli

Perhaps because of my background I think Tax evasion should be tackled as a national disease – a contagious one too! regards Frank Portelli

Thorny

Malta is a poor country ---- full of rich people.

A survey held some time ago showed that 65% of the Maltese population believe they can get away with tax evasion. It’s human nature - generally speaking if you believe you can get away with it you will try it. Tax evasion in Malta is treated like a game – people declare income they absolutely cannot hide. So we have to ensure that we catch the big fish I would prefer, if you wish to tackle this subject, that we treat it in the national interest without it becoming a political football – as once it becomes a political football the aim then becomes only the scoring of political points. I will set down some ideas in a separate Blog I am not against what Germany and Britain did. They paid an informant for a list of German and British Citizens suspected with tax evasion with money stashed in Liechtenstein. Now there's a thought regards Frank Portelli

Thorny

Malta is a poor country ---- full of rich people.

A survey held some time ago showed that 65% of the Maltese population believe they can get away with tax evasion. It’s human nature - generally speaking if you believe you can get away with it you will try it. Tax evasion in Malta is treated like a game – people declare income they absolutely cannot hide. So we have to ensure that we catch the big fish I would prefer, if you wish to tackle this subject, that we treat it in the national interest without it becoming a political football – as once it becomes a political football the aim then becomes only the scoring of political points. I will set down some ideas in a separate Blog I am not against what Germany and Britain did. They paid an informant for a list of German and British Citizens suspected with tax evasion with money stashed in Liechtenstein. Now there's a thought regards Frank Portelli

It sure pays locally and no one is sure if when the culprits are caught they refund back the funds that were misappropriated at the cost of a suspended sentence, not to mention that these Culprits, after defrauding the local tax-payers, continue to benefit from Government tenders.....and with the Contracts Department! Not to mention the Local Administration giving Presidential Pardons ( Malta zghira) for tax-evasions and hefty discounts on tax-defaulters on prompt payment. Maybe Malta should consider becoming a true Tax Haven for anyone considering defaulting in tax payments, tax evasions and tax frauds.

A well timed comment.

I am tying this to your earlier article about czars. If we had one in this sector we may get some headway.