Audit Office Raises Concerns Over Misleading Statements to Parliament
In a recent turn of events, the Audit Office has called upon the Ministry of Finance to launch a disciplinary investigation into what it deems misleading statements made by ministry officials. These statements were made during a parliamentary discussion on a 2019 bill proposal by DISY concerning deferred taxation.
The Audit Office’s report for the Tax Department in 2022 highlighted that Members of Parliament were provided with incorrect information, which led to significant revenue loss for the state. The report underscores that due to the erroneous information given by officials from the Ministry of Finance, the state missed out on millions in potential revenue.
Furthermore, the Audit Office believes that the financial impact on public finances from amending the main law was not properly communicated to Parliament, leading to a misinformed decision-making process. Among the financial implications was the conversion of accumulated losses into credits, which favored a particular bank, identified as bank “A”, resulting in a €417 million cost to the state.
Moreover, it was revealed that Parliament was kept in the dark about a guarantee fee payment of approximately €6.25 million owed to the state, which constitutes another loss of revenue. Contrary to these findings, the then Tax Commissioner had assured Parliament that no revenue losses were anticipated, and a spokesperson for the Ministry of Finance had echoed this sentiment, stating that the proposed regulations would not impact fiscal matters.
The Audit Office is now urging the Minister of Finance to identify and hold accountable those officials whose actions or negligence contributed to these misleading positions expressed by the Ministry’s General Directorate.
The backdrop of this decision stems from a March 2019 bill approval that allowed for deferred tax obligations from accumulated losses of restructured credit institutions to be converted into tax credits under certain conditions. This framework, set to last 15 years beginning in 2013, also included an annual guarantee fee paid by the credit institution to the Republic starting in 2018.
Following a recommendation from the European Commission’s Directorate-General for Competition, Parliament was compelled to amend the law to increase the guarantee fee. As a result, tax credits amounting to €151.6 million were utilized by bank “A” group, with €67 million going towards settling various taxes and leaving a balance of €84.5 million as a refundable amount from the Republic to the credit institution as of December 31, 2022.
If these tax losses are not settled with profits in the forthcoming years up to 2028, they will generate a tax credit of €265.3 million in favor of credit institution “A”. This situation has raised serious questions about the transparency and accuracy of information provided to lawmakers and has prompted calls for a thorough administrative review.
