Scicluna fends off questions on Malta’s tax rebate system from MEPs

Maltese finance minister Edward Scicluna had to defend Malta’s tax imputation system, as MEPs in the European Parliament’s committee for economic affairs questioned the country’s suitability to tackle anti-money laundering and taxation laws.

Scicluna, who is heading European council of finance ministers, insisted that Malta’s rebate system on tax charged on dividends to foreign shareholders – arguably one of the island’s main selling points in financial services – was not simply cutting tax down to 5%.

“The money left over from that rebate, gets taxed again,” Scicluna said, suggesting that any resulting profits eventually repatriated to the foreign shareholder’s country of origin would be subject to income tax once again.

“These statements are unfair, because they misunderstand the Maltese system,” Scicluna told MEPs like Sven Giegold (Greens) and Fabio de Masi (European left), who took Malta to task over its tax imputation system.

“There is a big difference between rates of taxation, and secrecy and lack of exchange of information,” Scicluna said.

He said Malta’s financial intelligence analysis unit website contained all documents and legislation showing Malta’s evaluation by Moneyval, the removal of secrecy in 1994, and the list of people arraigned in court on money laundering.

“What you describe is a caricature of our taxation system,” Scicluna said of Malta’s effective 5% tax rate, which results from an 85% rebate on taxed dividends paid to foreign shareholders.

READ MORE How Malta wipes out €4 billion in tax that could be paid elsewhere

MEPs like German member Sven Giegold said Malta’s taxation system resembled that of a tax haven and that the Maltese presidency was not pushing tax reforms aggressively enough.

The European Greens have taken aim at Malta’s jealously guarded taxation refunds, with a 31-page report arguing that Malta fell short of fair taxation policies.

Scicluna however insisted that Malta will be pushing ahead on talks with the fourth anti-money laundering directive (4AML) and that it would be an honest broker on talks on the common corporate tax base (CCCTB) – which, as it happens, Malta finds little or no favour with.

German MEP Fabio De Masi also saud that Malta had backtracked on a proposal to publicise the ultimate beneficiary owners of trusts.

Scicluna replied that the European Council was taking a legal approach on privacy and data protection for trust beneficiaries. “It is about balance: the Council’s position is to give power to all FIU authorities to share databases but not making it public and instead giving it to those authorities which matter.”

Scicluna also said that Maltese tax authorities had completed all investigations related to Swissleaks and that a sum of money had been recouped from those involved in the investigation. On Panama Papers, the Maltese tax authorities were investigating some 100 cases, and the first 33 investigations had already been started.

The PANA committee chairman, German MEP Werner Langen, asked Scicluna what he would to ensure better cooperation with MEPs and allow better access to documents related to tax rulings.

“The Commission has asked for tax rulings from each member state, and Malta does not have tax rulings. The system is equal for all and there is no discrimination between one case or the other – unlike other systems.

“Taxation is still the remit of member states themselves. When PANA invites respective governments to cooperate with the inquiry committee, it is up to governments themselves to respond to that invitation. In our case, you have chosen to visit our country… I will be pleased to meet you in Malta.

“However, the handing over of documents was not discussed in Ecofin, but left in governments’ hands to decide whether to cooperate or not.”

Maltese MEP David Casa (EPP) asked Scicluna when the FIAU would be appointing a new head. “The director never sent me any reports vis-à-vis any particular cases, it would have been illegal because the FIAU is autonomous,” Scicluan said, referring to suggestions that the FIAU was investigating the Panama Papers fallout, which implicated minister Konrad Mizzi and the PM’s chief of staff Keith Schembri.

“The chairman of the FIAU is the Maltese Attorney General. The process to find an executive director was a long one, and that person has now been selected by the board, and will soon be publicised.”