We saw it in 2004. We saw it again in 2011. Now, it’s here again. 

The European Commission has decided to re-launch the common consolidated corporate tax base (CCCTB) project in a two-step approach, with the publication of two new interconnected proposals: on a common corporate tax base (CCTB), and on a common consolidated corporate tax base (CCCTB). It is a single set of rules to calculate companies’ taxable profits in the EU.

The European Parliament vote which was taken today, 15 March, was in support of the Common Consolidated Corporate Tax Base by 438 votes to 145 votes, with 69 abstentions. However, all six of our Maltese MEPS voted Against this.

There are currently 28 corporate tax systems operating in the EU today, and taxation so far has been treated as a national competence as is established in the EU treaties. Recent events have caused Malta to lose its reputation as being a country that effectively counters abuse and that is committed to closing loopholes. This may explain why the calls for tax harmonisation in the EU have increased at a European level in recent years.

“I have always, and will always, keep fighting to defend Malta’s competence on its own tax system (which pre-dates our entry into the EU). In the European Parliament our focus will remain on stamping out abuse of the system and pushing back against any attempts to label Malta as a tax haven. It is not easy but we will keep fighting Malta’s corner. Of course we would have much stronger an argument if law enforcement in Malta did its duty and investigated recent events, notably the publication of the Panama Papers and their links to politically exposed people in Malta.” 

– Roberta Metsola, PN MEP

The CCCTB proposes that cross-border companies will only have to comply with one, single EU system for computing their taxable income. Given that currently 70% profits are shifted for tax purposes to benefit from strategic Intellectual Property location, large multinational companies such as Facebook, would not be able to do so anymore. 

These proposal sound great, unless you’re a small economy like Malta.

“We voted against these proposals for a directive because they are the first step in harmonising tax across the EU. Tax policy is a sovereign matter between EU member states and this is how it should stay,” 

– Labour MEPs Alfred Sant, Miriam Dalli and Marlene Mizzi.

The consolidated taxable profits will be shared between the involved Member States, using an apportionment formula. Each Member State will then tax its share of the profits at its own national tax rate. However, being a small Member State with smaller markets and fewer factories and resources than other EU countries, Malta may lose out on these profits if the formula take into account the location of where the goods and services are produced and sold. 

Furthermore, focusing on the establishment of companies having a “digital presence”, companies will be practically forced to stop servicing countries where it is not worth having a digital presence, like Malta.

So what are the advantages of the relaunched CCCTB?

• It is a modern, fair and competitive corporate tax framework for the EU, mandatory for large multinationals
• Improves the Single Market for businesses by encouraging stable financing
• Gives strong incentives to Research and Development
• Combats tax avoidance by closing loopholes outside the EU
• Supports growth, jobs and investment in the EU by more tax certainty for companies 
• Compliance costs will be reduced, meaning companies may have less expenses incurred from adhering to industry regulations. 

On the other hand, these are the disadvantages

• Malta’s economy competes using taxation, thus it may become less competitive if bound by one tax regime
• Member States have diverse economies and a one-size fits all approach might not be in the interest of all 28 EU countries
• Smaller Member States do not necessarily produce the goods and services themselves thus the ‘formula’ may leave them out
• Tax administrations would have to operate an additional tax system if the current tax code is maintained
• It is against consumer freedom and discourages the free internet

What do you make of this latest development? Let us know in the comments below!

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David Grech Urpani

Lovin Malta's Head of Content, Dave has been in journalism for the better half of the last decade. Prefers Instagram, but has been known to doomscroll on TikTok. Loves chicken, women's clothes and Kanye West (most of the time).