Scicluna insists Malta won’t budge from ‘red line’ over tax sovereignty

Finance minister will commission an impact assessment on on how a proposed package by the European Commission to clamp down on aggressive tax planning will impact Malta’s economy

Malta will resist any attempt by the European Commission to reduce sovereignty over its own fiscal affairs, finance minister Edward Scicluna pledged.

“Malta’s relatively low taxation rates in and of itself shouldn’t be considered an abusive, harmful or unjust practice,” he said. “Malta condemns tax evasion, and is therefore ready to cooperate to reach an agreement that will enhance tax transparency and improve the exchange of tax-related information between EU member states.

“However, we are not ready to accept any form of tax harmonisation or any changes to our tax system. This will remain a crucial argument, and we won’t allow anyone to cross this red line.

The European Commission last week published an anti-tax avoidance package containing several elements to fight base erosion and profit shifting (BEPS), that will work towards a common EU position on tax havens.

Key features include legally-binding measures to block the most common methods used by companies to avoid paying tax, sharing tax-related information on multinationals operating in the EU, and a new EU process for listing third countries that refuse to play fair.

‘Nothing wrong with better tax planning’ – De Marco

PN deputy leader Mario de Marco reiterated his defence of Malta’s full imputation system of taxation, describing it as an example of “better tax planning”.

“There is nothing wrong with better tax planning and we mustn’t confuse it with tax evasion,” he said. “Malta is not complicit in tax evasion and we shouldn’t let anyone tell us that we are.”

“Malta had radically updated its laws in 2004 to become an onshore legislation, and we are deemed compliant with EU law. It is totally unacceptable for the European Commission to now claim that there is something wrong in our legislation.”

He said that Malta won’t be alone in its fight against proposed tax harmonisation – arguing that other European countries, including the United Kingdom, share a similar stance.

Shadow economy minister Claudio Grech struck a more sombre tone, warning that “the collective defence” posed by Malta’s government and Opposition may not be enough to prevent the proposals from passing into EU law.

“We must start discussing potential measures that we can implement if these proposals pass,” he said. “Malta’s economy is too reliant on the financial services sector, and we must start thinking from now about how we can diversify it and about what new incentives we can offer.”

Scicluna announced that the government will commission an impact assessment on how the proposed package will impact the Maltese economy.

“The government is currently studying these proposals in detail, but at an early glance it is clear that we are willing to accept some proposals, while refuse others that we believe go beyond their stated intent to fight tax evasion and abuse,” he said. “However, at this stage, it would be wise not to engage in baseless speculation.

He added that the government intends to hold meetings about the proposed directive with the European Commission as well as other EU member states, and do “all it takes to ensure Malta’s interests are protected in any final package that could be reached in the European Council.”

In response to questions by Oppositions MPs Claudio Grech and Kristy Debono, Scicluna denied that the government has a ‘Plan B’ to prepare for the worst.

“We will not budge from our defence of our full imputation system of company taxation, a system that the EU’s Code of Conduct had evaluated in 2004 and deemed fully compliant with European law.”

He recounted that he has already used the threat of a veto to force the European Commission to modify certain clauses within the BEPS proposal, including a phrase that proposes “a common but flexible approach”.