Corporate taxation proposals: Malta 'breaks silence on reservations'

Malta has come out strongly against applying “rigid rules”, urging the European Commission to adopt a more flexible approach as it drafts legislation on taxation.

Corporate tax was high on the agenda of EU finance ministers meeting in Brussels, during which they discussed the Base Erosion and Profit Shifting (BEPS) project, an initiative pursued by the Organisation of Economic Cooperation and Development (OECD).

BEPS tries to address the exploitation of international tax rules and loopholes by multinational enterprises. Companies use a number of schemes to shift profits across borders to take advantage of tax rates that are lower than in the country where they made the profit. According to the OECD, some multinationals end up paying as little as 5% in corporate taxes when smaller businesses are paying up to 30%.

The Council today adopted a directive aimed at improving transparency on tax rulings given by member states to companies in specific cases about how taxation will be dealt with. The directive is in line with developments within the OECD and its work on tax base erosion and profit shifting.

Speaking to MaltaToday, Scicluna said Malta – along with other EU countries – flagged concerns of applying rigid rules for all.

“We successfully pushed for the inclusion of  ‘a flexible’ approach in the Council Conclusion on BEPS,” the Finance Minister said.

He added that Malta had been the one to break the silence on reservations held by several EU countries.

Scicluna said it was more an issue of concern – rather than a threat – to Malta’s sector.

The council conclusion “stresses the need to find common, yet flexible, solutions at the EU level consistent with OECD BEPS conclusions, paying specific attention to compliance with EU Treaty freedoms and competences and supports an effective, swift and coordinated implementation by Member States of the anti-BEPS measures to be adopted at EU level.”

Among others, it also “stresses that unfair tax competition between Member States as well as between the latter and third countries could affect the functioning of the Single Market, whilst acknowledging the importance of taxation for competitiveness”.

The two Council Conclusions agreed to today will be passed on to the European Commission to draft legislation on taxation. The Commission has been urged to find “a common yet flexible approach”.

“This is a big success in view of our specificities,” Scicluna said.

Alongside Ireland and Cyrpus, Malta reiterated that the effective level of taxation should remain one of national competence. It is understood that, whilst Malta will be ready to take part in discussion, it will be also retain the right to veto.

Referring to the Council Conclusion on the Code of Conduct on business taxation, Scicluna said the three countries obtained consensus for their proposal.

“I am extremely satisfied that an acceptable compromise was found in both instances,” Scicluna said.

Ten member states also agreed on some aspects of a harmonised tax on financial transactions and gave themselves until the middle of next year to reach agreement on remaining issues, including tax rates.

Talks on a financial-transaction tax (FTT) have been going on since 2011 and the remaining member states are Germany, France, Italy, Austria, Belgium, Greece, Portugal, Slovakia, Slovenia and Spain. Estonia pulled out.