Malta denounced as tax haven as it assumes EU presidency
Malta was today (11 January) accused of being a tax haven as it took over the rotating presidency of the EU. Some companies in the EU’s smallest country pay as little as 5% tax on their profits.
The small Mediterranean island would have been included in the list of tax havens if the criteria developed by the European Commission for non-EU countries were applied to the EU, according to a report commissioned by Green MEPs.
No EU country has ever appeared on an EU tax havens blacklist.
“This is completely unacceptable and raises serious questions for the forthcoming EU presidency,” said Sven Giegold, the Greens’ economic and finance spokesperson.
On paper, Malta has the highest corporate tax in the EU. But in reality a sophisticated system of tax breaks, on intellectual property for example, allows companies to pay as little as zero corporate tax.
The same seems to apply to the taxation of dividends received by shareholders, which, along with other discounts, reduces the effective tax rate to just 5% for trading companies, according to the report written by accountancy lecturer Tommaso Faccio of Nottingham University Business School.
Between 2012 and 2015 Malta’s regime on dividends earned in foreign countries allegedly deprived other nations’ public budgets of some €14 billion.
Asked by EurActiv.com, a Maltese presidency spokesperson said Malta’s tax regime was reviewed by the Commission prior to the country’s accession to the EU in 2004.
“The fact that a country offers competitive tax rates does not make it a tax haven. Indeed, tax competition is something which many jurisdictions, including now the US and the UK, are embracing,” the spokesperson added.
Giegold insisted that the case raises serious concerns, particularly as tax legislation is not included in the Maltese programme.
In fact, although taxation is not among the presidency’s top priorities, it does appear in the fine print of the various dossiers Malta will push forward.
“The Maltese presidency will also carry forward work on a number of ongoing taxation files, most notably the direct tax and indirect tax packages of Autumn 2016. Key dossiers within these packages include the amendment to the Anti-Tax Avoidance Directive and the re-launch of the Common Consolidated Corporate Tax Base,” the presidency programmme said.
Last April, a number of Maltese politicians, including Prime Minister Joseph Muscat, faced calls to resign after the leaked Panama Papers showed two of his allies had offshore accounts, including Health and Energy Minister Konrad Mizzi.
“We expect Malta to examine these cases properly and ensure that the European Anti-Money Laundering Directive is fully implemented at home. Failure to keep their own house in order will not reflect well on their intentions for the coming six months,” added Green tax spokesperson Molly Scott Cato.