The powers of the Commissioner of Inland Revenue under articles 14 and 20 of the Income Tax Management Act

Abstract

Embedded in the text of the Income Tax Management Act, which came into force with Act XVIII of 1994, are Articles 14 and 20. These two Articles refer to the right the Maltese Commissioner has to ask taxpayers for further information, and to physically inspect business property. In Chapter One, this dissertation identifies who the taxpayer is and subsequently examines when the Commissioner may resort to use these Articles. In a nutshell, such Articles are used when information needs to be collected in the furtherance of a tax investigation. Tax investigations may be initiated both locally, and by foreign tax authorities (through the local tax authority) due to the Mutual Agreement Procedure. This study puts Articles 14 and 20 in perspective by explaining in detail in Chapter Two, how the Mutual Agreement Procedure allows tax authorities in different countries to cooperate and exchange information when deemed necessary, both from an OECD (Organisation for Economic Cooperation Development) and a European Union perspective. Such information exchange may only be used when tax fraud or a serious suspicion of fraud exists. Furthermore, foreign tax authorities must respect the local legislatory framework (example taxpayers' rights and confidentiality issues) when engaging in such exchange of information. A review of the methods with which information may be exchanged is given, together with the major drawbacks of the Mutual Agreement Procedure resulting from the ever-increasing complexity of business transactions. Possible solutions for improving procedures are identified and discussed in the last chapters of the dissertation. The local situation was kept in mind throughout the whole study, and comparisons between the international and local perspective were carried out wherever possible.