Prof. Edward Scicluna draws tax sovereignty ‘red line’

Malta’s Finance Minister Prof. Edward Scicluna has pledged that Malta will resist European Commission (EC) attempts to reduce Malta’s sovereignty over its own fiscal affairs, in response to a proposed package from the EC to clamp down on aggressive tax planning.

Last week, the EC published an anti-tax avoidance package containing several elements to fight base erosion and profit shifting (BEPS), with the aim of working 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.

Minister Scicluna will commission an assessment to gauge the potential impact of the package on Malta’s economy:

“Malta’s relatively low taxation rates in and of itself shouldn’t be considered an abusive, harmful or unjust practice. 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.”

Nationalist Party Deputy Leader Dr Mario de Marco has again defended Malta’s full imputation system of taxation, calling it “better tax planning”:

“There is nothing wrong with better tax planning and we mustn’t confuse it with tax evasion. 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.”

The Hon. Dr De Marco is sure that Malta will have allies against proposed tax harmonisation, arguing that other European countries, including the United Kingdom, share a similar stance.