Representatives of the Maltese government will be meeting US Ambassador Molly Bordonaro to set a concrete agreement for a timetable for the revival of the US-Malta double taxation agreement.
Speaking after yesterday’s ECOFIN meeting at the EU’s Council of Ministers, parliamentary secretary Tonio Fenech told Business Today the intention of the government is for the discussions not to take long to materialise.
“It’s been 10 years since the last agreement so the international financial world has changed a lot. The meetings will be of a very technical nature which will delve into each type of commerce and industry such as manufacturing, services, financial services, and which incentives will benefit whom through the Business Promotion Act.”
Yesterday the ECOFIN meeting also concentrated on a roadmap for increased EU-US collaboration and the removal of barriers of trade between the two continents, especially in the realm of financial services.
Fenech said there is a great potential in attracting investment to Malta through a double taxation agreement especially in the case of US companies using Malta as a stepping stone for Libya.
Labour MP and shadow foreign minister Leo Brincat yesterday hit out at the government on accusations that the 1997 Labour government had slept on the issue of the double-taxation agreement with the US, which so far remains postponed.
The crucial agreement, which was introduced by Labour in 1980, was stopped by the Americans on 16 November, 1995.
Brincat accused Prime Minister Lawrence Gonzi of giving the impression it had been stopped in 1997, when Labour was in power. “Documented correspondence shows that Eddie Fenech Adami’s Nationalist government had made a desperate attempt on the eve of the October 1996 elections to convince the US to go back on its decision to stop the agreement,” Brincat said yesterday, citing September 1996 correspondence held between Finance Minister John Dalli and deputy assistant secretary for taxation policy at the US Treasury, Donald C. Lubick.
Brincat said ministry consultant Edgar Wadge had been told by US Treasury international tax counsel Joseph Guttentag the US was not ready to reverse the decision it had just taken in November 1995.
“Not only was the US determined to stop this agreement, but they told the Maltese government that irrespectively of the government’s explanations, their (US) conclusions had been correct.”
Brincat said it had been Labour with the help of Malta Financial Services Authority chairman Dr Joe Bannister and economist Edward Scicluna who attempted to reactivate this agreement between 1996 and 1998.
“One has to add the discussion I personally had as minister of finance and commerce with Dr Guttentag during Easter 1998… these discussion were held in his Washington office as part of a US roadshow to promote Malta as a centre of financial services.”
The new feud on the double-taxation agreement comes in the wake of a renewed political commitment from the US to restart discussions on the issue after Gonzi met US President George W. Bush, earlier in October.
A working group will be established to iron out matters on the suspended agreement by the end of the year.
The double-taxation agreement with the US has been deemed vital for attracting US investment to Malta. US businesses and individuals resident in the US and making taxable gains in Malta have to pay taxes in both the US and Malta. Double taxation agreements enable tax to be paid in the country of residence only. Both countries’ taxation authorities exchange information about such declarations, and so may investigate any form of tax evasion.