Malta must resist tax harmonisation

In recent months the rhetoric calling for increased harmonisation of taxation across the European Union has increased sharply. The thinking in the European Parliament and among many Member States is no different. 

This presents Malta with a huge challenge that everyone must work together to address. Not being able to control the level of taxation for companies based in Malta would make us lose our competitive edge, endanger thousands of jobs and damage our economy at a time when we need to do all we can to remain competitive. 

This runs deeper than the immediacy of job cuts or companies pulling out of Malta. It is a cardinal principle that such matters are a question of national sovereignty and while the EU has a role to play in combatting tax evasion, taxation issues like this must remain up to Member States to decide. 

Some quarters have recently renewed efforts towards having a so-called EU ‘Common Consolidated Corporate Tax Base’ or CCCTB. This time it is more than just another badly thought-out EU acronym. The introduction of such a system would mean that Malta would have to fundamentally change its tax model and be immediately put at a disadvantage. 

The problem with having a CCCTB is that it follows a one-size-fits-all approach without taking into consideration the economic realities of different States or their domestic market size and resources. I am convinced that this is not the correct way forward for Europe, because inevitably in any such system it is our Union’s smaller economies, such as Malta, that will be forced to bear the disproportionate brunt of the policies. In effect it will see smaller efficient economies like ours end up subsidising larger less efficient ones. 

It is worrying because this initiative flies in the face of what the EU is all about. We claim to be an economic Union but at the same time this move will reintroduce national economic barriers and re-ignite nationalistic sentiment even in terms of tax revenues and growth. We cannot choose to be an economic Union on some issues and ignore the fundamental block on which such a Union is built. 

Former finance Minister Tonio Fenech fought successfully for years to keep larger countries from introducing similar systems for the entire Union and it is good to see that our current Minister for Finance has followed in his footsteps and not changed this policy. 

Even in the European Parliament, all six Maltese MEPs have remained united in insisting that these issues of taxation must remain a national competence despite the political push to change the system. As recently as last month, we all voted against a report that called for such an EU-level system. Our position was clear. We are in favour of as much transparency as possible and united in the fight against tax evasion, but we will not accept the introduction of a mandatory CCCTB for Member States under the guise of fighting tax fraud. 

It is clear that the calls from larger EU economies will continue to grow much louder, even if not necessarily immediately. We will continue the push from within the European Parliament but Malta needs to mobilise all its efforts to continue the effort to convince Member States of the need for sovereignty on this issue to remain being respected. 

There is a bi-partisan understanding that on this issue, Malta must continue to act as one and remain steadfast in its opposition. It is too important an issue for that not to happen.