Updated | Opposition defending ‘small fry’ – minister

Updated at 17:31 with reactions from the Ministry of Finance

"With its opportunism, the Opposition is defending those who were involved in the fraud, calling them ‘small fish’," the Finance Ministry said in a reaction to the Labour Party's conference.

The Ministry said it was Finance Minister Tonio Fenech who had asked the Police Commissioner to investigate the fraud cases and he was the one who had set up the internal board to evaluate what changes should be carried out.

“But the Opposition, in all of its opportunism, is defending those who are involved in the fraud and calls them ‘small fish’. The way the Opposition is dealing on this matter requires all condemnation,” the Ministry said.

It went on to say that in the last months, several measures have been implemented, including the setting up of an analysis and control section, control and internal auditing on the work carried out by department officials, analysis of the call for refunds and risk assessments.

"Additional controls have been inserted on claims for refunds, where they are being scrutinized and if they do not pass the necessary critieria, they would be withheld for further investigations.”

It added that the VAT law has been amended so that those who fail to present the commissioner with fiscal receipts will be categorised as a criminal offence. ”Another amendment was tied to those persons who are found in possession of a software which deletes or damages information or record,” it said, adding the latter also applies to the person who supplies the software.

An audit report carried out 15 months ago - but only tabled last Monday in Parliament – found cases of fraud, a lack of accountability and risk awareness at management levels inside the VAT Department.

Reacting to the report, Labour MPs Leo Brincat and Karmenu Vella said the government “should shoulder political responsibility... If such report is published abroad, people would resign and necessary measures would be taken. But what we are appealing for right now is for government to come forward with at least a comment or a reaction to what has been said.”

Quoting comments by the VAT Department in the report, Brincat said the department had been sending monthly reports to the OPM and the Finance Ministry and none of them had gone back with remarks or complaints of lack of accountability.

“This report only shows two things: either government was not doing its job when it was supposed to monitor the department, or there is complicity on the government’s side in the way the department operates,” Brincat said.

He reiterated that it is not the VAT department which should shoulder the responsibility, but Prime Minister Lawrence Gonzi and Finance Minister Tonio Fenech.

Brincat raised concerns on why a five-page report, which was ready in three months, was only made available to the public 15 months later. He added that whilst the report was dated February 1, 2010, the comments made by the VAT department were not dated.

Brincat also urged government to say whether those heading the department were given performance bonuses whilst the alleged fraud cases were taking place.

Vella added that to date, there is nothing which indicates that government is implementing the recommendations set out by the report. Recalling that the audit investigation was carried out following two fraud cases which amounted €2 million, Vella said: “I dare say that the department’s inefficiency and the loss of VAT will substantially amount to more than the €2 million.”

Vella said that according to the report, an 11% VAT gap exists – 11% of due VAT which has not been collected yet. “Even though these might be fraud cases, I believe it is more tied to inefficiency on behalf of the department.”

“The report also revealed how workers didn’t even know they had an intranet facility and how VAT inspectors were carrying out lower grade jobs – when someone could have been doing it,” Vella said.