13/05/21

MALTA: Government and Opposition oppose EU tax harmonisation plans.

As published on newsbook.com.mt, Thursday 13 May, 2021.

Both the government and the opposition have come out against proposed tax harmonisation rules.

The European Parliament discussed tax harmonisation rules following a proposal by US President Joe Biden which called for a minimum corporate tax rate of 21 percent for companies. While France and Germany have already openly backed such proposals, Socialists and Democrats in the EP have recently endorsed a call to establish an across-the-board common corporate tax.

Such plans are likely to find the oppositon of smaller, peripheral countries that have established a significant revenue stream through preferential rates for multinational corporations. Malta too has long adopted a model of attracting investment by providing favourable tax rates for international companies basing themselves on the island. This has led to large multinational companies such as BMW, Lufthansa and Volkswagen to build bases in Malta.

The Maltese Government has re-iterated its position against such proposals. A spokesperson for the Finance Ministry said that Malta was closely following developments on the matter. “Malta has numerous physical disadvantages such as a lack of economies of scale and the major drawback of it being in the Southern periphery of Europe, resulting in limited connectivity,” the spokesperson said.

“These physical barriers mean high transport costs for trade, possibly among the European Union’s highest. Therefore the Ministry will continue to make the statement that Malta must be allowed to remain competitive in order to continue attracting business and for such competitive frameworks to remain in place,” she added.

The Opposition echoed these sentiments, expressing its disagreement to these proposals. Finance shadow minister Mario de Marco insisted that any attempt at restricting national sovereignty on fiscal issues is to be stood up against.

“It is imperative that the European Union recognises the unique challenges of smaller, peripheral nations and stays away from a seeking a one-size fits all approach,” he said. “We believe that taxation should remain a matter of sovereignty and as a party stand four-square behind government in pushing this message at a European level,” he added.

The EU has long been trying to draw up rules preventing companies from setting up subsidiaries to qualify for a softer tax regime.

The S&D are pushing for the taxation of digital giants and an ambitious minimum effective tax rate. The group insist they would like for this decision to take place ahead of a G20 meeting this year.

Negotiations at the Organisation for Economic Co-operation and Development (OECD) have also sought to re-allocate taxation rights and redefine taxation rights. Negotiations in this regard have been ongoing for almost a decade.

US President Biden’s proposal and pledge to actively re-engage in the negotiations has brought new impetus.