EU Commissioner dubs Malta a ‘fiscal black hole’ in latest skirmish on tax

Malta has been dubbed a “fiscal black hole” together with other EU member states with attractive tax regimes, by the European Union’s economy commissioner Pierre Moscovici.

Yesterday the EC tabled the latest part of the VAT system reform to grant more freedom to the EU member states.

But the Commissioner for Economic and Monetary Affairs Pierre Moscovici accused a number of EU members of being “black tax holes”, and promised to exude “intelligent pressure” on those who violate the EU’s tax laws, New Europe reported.

“Some European countries are fiscal black holes,” said Moscovici. “Obviously many EU countries are places where aggressive tax optimisation finds a place… you realise that the tax flows are going to countries like Ireland, the Netherlands, Luxembourg, Malta, Cyprus.” 

This is not the first time Moscovici has named member states who act as tax havens. On 5 December, when the 28 EU countries adopted a blacklist of 17 tax havens operating outside their borders, the Commissioner Ireland, Luxembourg, Malta and the Netherlands’ aggressive tax planning.

On Tuesday 23 January, finance ministers of the EU will meet in Brussels where they are expected to confirm the blacklisting of eight countries, Panama included, in the tax haven blacklist.

Moscovici asked the 28 member states to make transparent commitments and to not weaken the list. “Any reduction of the blacklist can be read as a weakening and there is no secret, at the next meeting of EU finance ministers, the list will melt,” said Moscovici.

The EC is now proposing a new VAT system that will maintain a minimum general rate of 15%, while allowing member states to impose lower rates in four distinct categories. The member states will be able to set two reduced rates between 5% and the general rate, an exception on VAT payment (zero rates) and the fourth rate between zero and the reduced amount.

The EC wants to eliminate the current list of goods and services that can be applied with a ‘reduced’ VAT rate, and instead introduce a new list of products such as weapons, alcoholic beverages, tobacco, products related to gambling, precious metals, smartphones, household appliances or financial services.

The new regime must ensure that the weighted average of VAT rates is higher than 12%, in order to avoid tax competition between the EU member states in the collection of taxes.

The old model established a general VAT rate of at least 15% for all goods and services, but as the member states were able to apply the 5% reduced rate to the predefined list of goods, together with perks gained by certain member states during their EU accession process.

This has led to a “mosaic” of regulations in the EU that also generate “inequalities” within the bloc. the EU bloc. “Some Member States enjoy exceptions, while others are not allowed to apply reduced rates or zero rates to the same products or services,” said Moscovici.