Scicluna on revealing UBOs: Do it with European legislation, not leaks

Finance Minister Edward Scicluna has once again defended Malta’s tax imputation system as he faced questions from the Brussels press corps during a press conference on tax rules following a meeting of European finance ministers.

Scicluna said referring to The Malta Files, a journalistic project that focused on Malta’s generous tax refund system for foreign shareholders, that all member states were fighting tax avoidance and tax evasion.

“But you do this by serious legislative work, by cooperation. All in the EU abide by its directives. Malta carried forward the Anti-Tax Avoidance Directive (ATAD) and we have no started working on the laborious Common Consolidated Tax Base. We have also reached agreement on double taxation dispute resolution and this work is happening alongside the OECD report on BEPS (base erosion, profit shifting).”

Scicluna then accused the stories in The Malta Files, published by the European Investigations Collaborations network of journalists, which includes MaltaToday, of damaging Malta’s reputation. “If one wants to talk about ultimate beneficial owners, there are ways to bring about serious legislation in the EU,” he added.

Scicluna said that while financial practitioners would use any tax regime in the world to minimise tax, he said the EU was trying to minimise this reality through its directives.

“Malta has never protested or blocked any rules on ATAD… as long as there is a concerted effort across the EU, we will move slowly but surely in the right direction.”

Franco-German talks

Leading German business newspaper Handelsblatt has also reported sources saying that newly-elected French President Emmanuel Macron and German Chancellor Angela Merkel were planning to synchronise their tax codes for businesses.

In an interview with Handelsblatt ahead of the meeting, French finance minister Bruno Le Maire said: “Harmonizing corporate taxes is a crucial issue in Europe. It’s essential in fighting distortion of competition and illegitimate competition through tax dumping… US electronics giant Apple at one point paid only 0.005 percent in taxes on all profits made within the EU.”

In 2012, former French president Nicolas Sarkozy and Merkel had produced a green paper on the harmonization of corporate taxes. But the initiative came to a halt when Sarkozy lost the presidential elections later that year.

The green paper produced at the time could form the basis of renewed tax harmonization talks but German finance minister Wolfgang Schäuble was reported to be prepared to take tax harmonization one step further and include more countries into the project: possibly introduced Italy and Spain in a common tax law.

The EU Commission’s 2011 plan for a common consolidated corporate tax base was rejected after almost four years of fighting.

A new initiative started last year is now trying to achieve harmonization in piecemeal: First, the Commission wants to implement common rules for determining a firm’s EU-wide profits.

A future second step should then provide a common base for redistributing tax revenues between EU member states. But that would mean that some countries would lose some of their current revenues, while others would gain. And no one wants to be among the losers.

It is not just Malta that would not agree with this: in seven EU member states, including Ireland and Denmark, national parliaments have voiced concern that EU tax legislation might violate fiscal sovereignty.

Schäuble himself has doubts about the new common corporate tax base initiative, sources within the finance ministry told Handelsblatt. Even though he officially supports the draft, he disagrees with the proposal of tax cuts for research investments and tax credits for investments.