Malta ‘Left With Only Three EU Allies’ In Key Fight Against Minimum Taxation
Finance Minister Clyde Caruana has delved into some detail about the immense challenges facing Malta in its quest to resist plans for a minimum level of taxation across the European Union.
During a conference organised by the Malta Business Network yesterday, Caruana said only three other EU member states, Ireland, Cyprus and Luxembourg, disagree with the argument in favour of minimum taxation levels.
“As things stand, the EU has a qualified majority in favour of minimum taxation levels,” he admitted. “From what I can understand, even the Netherlands has now joined this club, so the number of member states in favour of some form of tax discretion is going down over time.”
He said Malta would seek to build bridges with Ireland, Cyprus and Luxembourg in the coming months to ensure they present a common front against tax harmonisation, but said the island must be more transparent about its taxation system.
“Ultimately, the main worry [of EU member states] is that our tax system is being used for money laundering or that we’re somehow getting an unfair advantage over their tax systems through companies wiring the profits over here. The more transparent we are, the more points we stand to gain with them and we’ll have more leverage to negotiate in the years to come.”
Malta’s full imputation corporate taxation system is crucial in attracting foreign investors, but it’s found itself under the cosh through plans by the Organisation for Economic Co-operation and Development (OECD) to clamp down on tax avoidance strategies.
Meanwhile, the United Kingdom’s exit from the EU has seen Malta lose a key ally against moves towards tax harmonisation.
“Domestic tax base erosion and profit shifting (BEPS) due to multinational enterprises exploiting gaps and mismatches between different countries’ tax systems affects all countries,” the OECD said on its website. “Developing countries’ higher reliance on corporate income tax means they suffer from BEPS disproportionately.”
“Business operates internationally, so governments must act together to tackle BEPS and restore trust in domestic and international tax systems. BEPS practices cost countries 100-240 billion USD in lost revenue annually, which is the equivalent to 4-10% of the global corporate income tax revenue.”
Caruana said yesterday that the European Commission has informed EU finance ministers that it plans to push for some sort of minimum taxation levels in the coming years, even if there’s no agreement at OECD level.
“It won’t happen this or next year, but the discussion is moving in that direction, a result of the fact that big economies like France and Italy are in dire straits.”
“The European Commissioner is doing its utmost to raise tax revenue even for its own resources.”
He said Malta’s stance remains in favour of defending its imputation system, which it successfully negotiated prior to its EU accession, but said it must be open to implementing changes favouring tax transparency.
“We’re quite adamant we need to safeguard [our full imputation system], but we can’t ignore what is happening when the European Commission pushes for more transparency on tax flows,” he said.
“I strongly believe that once we’re done with the [COVID-19 related] test ahead of us, we must engage with the big boys of Europe, such as Germany and France, and start a constructive dialogue where we hear what they want to from us in terms of tax transparency.”
“We must ensure that we understand their worries and that they understand a one-size-fits-all model isn’t in the interest of small economies at Europe’s periphery.”
“We can’t ever overcome this [geographical] reality, so we must push our arguments in favour of some form of flexibility which allows jurisdictions like ours to retain some control over their tax system.”
What do you make of Clyde Caruana’s statement last night?
READ NEXT: Gżira Man Fighting For His Life After Mrieħel Industrial Zone Accident
