IN A move designed to give starving state coffers an immediate cash boost, parliament yesterday rushed through a law writing off penalties and interest on back taxes accrued up until December 31, 2008.
Based on a legislative proposal tabled by the DISY party, the law provides for any interest or fines exceeding 5.0 per cent of the total amount due to the Inland Revenue Department to be written off, provided that the arrears will be settled in full by the end of this year.
The arrangement covers tax debts up until December 31, 2008, and applies to individuals and companies alike.
In a discussion lasting barely 10 minutes at the plenum, the legislation went through with a majority of votes, despite warnings by the Attorney-general’s office that it is unconstitutional.
In a letter to the House Finance Committee, the AG’s office said the proposal would have the same effect as a similar attempt in December 2007, which was ruled as being discriminatory by the Supreme Court.
According to the riling in May 2008, the provisions of the law “bring about the unfavourable treatment of lawful individuals who meet their obligations towards the state and benefit those who refuse to assume and fulfill the same obligations.”
The top court said the proposal is in conflict with articles 24 and 28 of the constitution, which state that all persons are equal before the law and that every person is bound to contribute according to their means towards public burdens.
Tax authorities estimate that outstanding tax arrears by the end of 2008 amounted to some €355 million.
Given that a large chunk of this amount consisted of interest and penalties and was considered irrecoverable, lawmakers reasoned that the cash-strapped state can at least recover the initial nominal amounts owed to the Inland Revenue Department.
With the implementation of the law, it’s estimated that the state can collect between €100 million and €150 million in the short-term.
Questions of constitutionality aside, the law ‘pardoning’ tax debtors is almost certain to draw the ire of public-sector trade unions being pressed to contribute to much-needed austerity measures by agreeing to wage freezes. The unions argue the government should instead raise the money by cracking down on tax dodgers.
