Current taxation system needs to be protected, junior minister says

Malta’s taxation system is important not only for social partners and businesses, but for the country as a whole, social dialogue parliamentary secretary Aaron Farrugia said, explaining that there are around 10,000 direct jobs, and thousands more indirect ones, behind this system in Malta.

Farrugia explained this system has been successful in the past years. Recently, there has been a significant rise in foreign direct investment, so much that in the first six months of 2018, there has been an increase in €2 billion.

Speaking at a meeting of the Malta Council for Economic and Social Development (MCESD), the parliamntary secretary explained that the Ernst & Young Malta Attractiveness Survey last year revealed that 88% of those who invested in Malta chose our country because of the favourable taxation regime. For this reason, it is important to continue working to safeguard the present system.

During this meeting, a presentation on the recent developments in the area of taxation on the European and global level was delievered to members and social partners.

Farrugia expressed his support for measures which provide added transparency, minimise tax evation, and systems which contribute to improved and more sustainable economic development.

Meanwhile, he said that in order to address the country’s challenges, it is necessary to be united behind our existing systems, particularly in the context of changing realities within the EU. He also spoke of the need to form a new coalition of countries which have a direct interest in this sector in order to protect the present system – especially following Brexit.

The taxation system in Malta was accepted by both the EU and the OECD before Malta’s EU accession.  But since then, further emphasis has been made by both the European Commission and the OECD on tax avoidance – that is, to minimise tax in legal ways.

Finance minister Edward Scicluna, EU affairs minister Helena Dalli, MCESD chairman John Bencini and parliamentary secretary Aaron Farrugia

This was explained by finance minister Edward Scicluna during the same meeting, as he explained that Malta has adopted a number of directives and legislations in order to be in comformity with other member states. This includes the Anti-Tax Avoidance Directive 1 (ATAD1) u l-ATAD2. Malta also participated in the OECD Global Forum on tax transparency, as well as the BEPS Inclusive Framework which identifies different measures in order to minimise tax avoidance.

On the topic of new forms of taxation, such as the Financial Transaction Tax (FTT) and the Common Consolidated Corproate Tax Base (CCCTB), the minister clarified that, contrary to the the impression that it gives, Malta is not the only country which is not in favour of these new forms of tax.

In fact, less than half of member states support the introduction of these taxes, and only because it benefits them, according to the minister.

He also said that in the Tax Justice Network report, Malta did not feature among neither the ten countries in the Corporate Tax Haven index – nor among the twenty countries in the same index. This index includes the countries which are considered to be doing the most to avoid corporative tax. In the list, six out of ten countries are EU member states or their dependants.

Speaking at the same meeting, EU affairs minister Helena Dalli explained that taxation is an important national competence which safeguards the sustainability of the economic growth which the country is currently experiencing.

Evidence of this is found in foreign direct investment and the measures undertaken to ensure that people have more money left in their pockets.

For this reason, she said, it is important to ensure that our system is defended in line with EU treaties.