Malta and other small EU member states will soon lose a lot of their power within the bloc as a result of global and continental shifts in taxation and citizenship, a columnist for The Economist has predicted.
In an article published yesterday, the magazine’s Europe columnist ‘Charlemagne’ referred to US President Joe Biden’s pledge to clampdown on global tax avoidance, which has since materialised into an agreement by the G7 nations and the EU to set a global minimum corporate tax rate of 15%.
While Malta has a corporate tax rate of 35%, its full imputation system allows foreign businesses to benefit from significant rebates on dividends. In February, Finance Minister Clyde Caruana admitted that Malta was left with only three EU allies – Ireland, Cyprus and Luxembourg – in its resistance to EU-wide minimum taxation levels.
The columnist also noted that the European Commission is trying to find ways to bypass member states’ vetoes on taxation and clamp down on the selling of citizenship, including through the Maltese Individual Investor Programme.
This, they said, will usher in a new era of EU politics which will reduce the power currently enjoyed by small member states – in their words, “this golden era of tiny but mighty states is drawing to a close”.
“A disproportionate parliamentary weighting is one of many perks enjoyed by the EU’s gang of small states. Three quarters of the EU live in just seven counties, the rest over the remaining 20,” they wrote.
“Their politicians can wrangle top jobs, usually as compromise candidates. A common currency gives small countries a say in monetary matters, and they wield vetos on topics such as tax, foreign policy and changing the EU’s treaties. This means Malta (population: 500,000) can have as much say as Italy (population: 60 million) when shaping a club of 450 million. The EU acts as a geopolitical magnifying glass, making small countries appear much larger.”
“For big countries, the EU Is about clinging on to the remains of their former clout; for small ones, the EU has made them more powerful than they could have ever dreamed.”
The columnist described the citizenship schemes deployed by Malta and Cyprus as small countries “hawking the right to anyone willing to spend a few million euros on government bonds or an expensive flat overlooking the Mediterranean”.
“The commission is taking steps to crack down on this practice. Another small-country privilege – to dish out passports however they see fit – is disappearing.”
‘Charlemagne’ said that small member states must become less powerful if the EU is to become more democratic.
“The EU was founded to rein in the excesses of big European powers, not replace them with the (admittedly less bloody) excesses of their smaller peers,” they wrote.
“A bloc where some citizens have more day than others is not a healthy one. True, other continental sized polities struggle with this question. In America, South Dakota has the same number of senators as California. But that is no excuse to copy their mistakes. Europe’s small countries should not fear losing clout.”
“Until now they maintained their individual power as part of a weaker whole. In the future, they will play a smaller role in a stronger bloc. It is a different deal, but still sweet.”
What do you make of this writer’s assessment of the future of Europe?