MALTESE INCOME TAX

Maltese Income Tax Act

Maltese Income Tax Act

Introduction

According to different sources, there is a fine difference between tax avoidance and tax evasion. Nonetheless, tax avoidance is considerable phenomenon; however, tax evasion is considered as a criminal activity. Evasion from tax is unethical as well as unlawful as it deteriorates not only the economic regulations; but, it also contrasts the legal implications and laws imposed by the country. Evasion from tax has a significant impact on the economy of the country; hence, the legislative authorities take effective initiatives in order to eliminate tax evasion. Moreover, tax evasion is declared as serious criminal offence and the culpable of tax evasion undergo strict legislations imposed by income tax act.

Empirical research in tax evasion proposed explanations that are complicated by the measurement problem: tax evasion is not overt behaviour. Basically there are two strategies of measurement: relying on tax returns or relying on self-reports of taxpayers. The former sets out to infer from the concrete traces of tax behaviour (filed returns) whether a taxpayer shows signs of evasion. Apart from the difficulty per se (skilful evasion is not easy to trace), we face the obstacle here of how to discern between bona fide errors and deliberate attempts to conceal income in a return: do these two processes leave different traces in a return.

On the other hand, the latter measurement strategy, using self-reports, has to cope with a quite probable bias in the answers. People who claim to be honest as taxpayers may well be not honest in saying so, while those who claim to be noncompliant may be bragging. Moreover, research confronting the two measurement strategies. In order to effectively under declare taxes the taxpayer must pass three thresholds successively: first, he or she has to feel the will to do so (and this may well be dependent on the above-mentioned attitudinal and personal variants). Second, if he or she feels a tendency to cheat, he or she then has to have an opportunity to do so in a way that is not immediately visible to the authorities (opportunity may be dependent on income structure, education, fiscal competence).

Discussion

A number of adaptations have been proposed within the framework of rational choice theory. It is not possible to enumerate all these possibilities, but three major trends are mentioned. One approach is to redefine the situation faced by the taxpayer. He or she simply gets more options to choose from when comparing expectations. Options proposed in this context range from relatively simple ones such as hiring a tax consultant or retiring to minimize income through to bribing the tax inspector or emigrating to a tax haven. Another approach seeks to broaden the concept of expected outcome (Mo, 2003, 109-125). Different studies in this context, mention the introduction of other types of punishment than monetary fines (guilt, social disapproval, and the costs of being marked by the tax authorities for following years) and of the possibility, particularly in poor nations, that evasion will be affected by knowledge of ...