‘Suicidal’ to bin favourable tax rate for foreign companies - Robert Abela

Prime Minister Robert Abela has dismissed reports that he would consider changing Malta’s competitive taxation system which affords foreign companies a six-sevenths rebate.

Such a move, he said, would be “suicidal” for the country, he said.

Earlier this month, as the Labour leadership campaign was underway, Abela was reported as having said that Maltese businesses were right to complain that the tax system placed them at a disadvantage compared to their foreign counterparts based on the island.

The comments were made during a debate on Xarabank with Deputy Prime Minister Chris Fearne.

Abela, however, said on Wednesday that he had been grossly misquoted on the matter in the press, and that he had never called for the foreign companies’ tax relief system to be scrapped.

“That was the occasion in which I was most misquoted throughout the whole [leadership] campaign,” Abela said as he was fielding questions from journalists following visits he paid to shops in Valletta.

“I never said on Xarabank that the 5% – or six-sevenths refund – should be done away with. It would be suicidal for Malta if the 5% system were to be removed. I did not say I would do that, and I am not going to do that,” the Prime Minister said.

One of the biggest draws for foreign companies to Malta is the six-sevenths rebate on Malta’s highest tax rate (35%) from global dividends when those profits have been booked in a Maltese holding company.

It effectively allows shareholders of a foreign company to pay 5% tax on the profits generated globally once they get kicked up to a “Maltese” parent company.

This system, Abela underscored, would remain in place, but there would be efforts to help ensure there is a level playing field for Maltese businesses which are being adversely affected by the tax system.

“In cases where the local business community is being affected by the system, there should be more dialogue to ensure there is a level playing field for Maltese companies,” he said.

Pressed on what could concretely be done to address the matter, Abela said that the government was in dialogue with stakeholders, including the Malta Chamber of SMEs, on the issue, and that, where possible, solutions would be found.

'We won't wait for businesses to come to us - we'll go to them'

Abela said his visits to several business along Republic Street showed that the government would not wait for businesses to come to it, but would approach them itself.

"Today's experience highlights the pro-market stance we are putting into practice," he said, "We plan for these sort of visits to continue [...] It's an effective way of doing politics."

Economy Minister Silvio Schembri, who was accompanying Abela, said the visits meant to transmit a clear signal of continuity.

"Continuity doesn't mean we won't improve on what was done wrongly, but I think the Prime Minister gave a strong signal that there will be continuity in terms of the economy. The economy was doing well, and it will keep doing so," Schembri said.

He said that shop owners and local and foreign shoppers had spoken to them about "a sense of peace of mind" following the change in the country's leadership. "This is encouraging," he said.