Malta would lose 18% of tax revenue should EU introduce financial tax

Malta stands to lose around 18% of its tax revenue if the EU introduces the Financial Transaction Tax (FTT), the chairman of Finance Malta said today. 

MEP candidates and financial sector professionals participated in a roundtable conference held by the European Parliament office in Malta, discussing the EU's perspective on Financial Services and the impact on the Maltese economy. 

Candidates from the major political parties reiterated their stand against the FTT proposal, subscribing to the view that taxation was the competence of the respective member states. 

However, Alternattiva Demokratika chairperson Arnold Cassola declared himself in favour, saying the proposals ensured greater consumer protection against harmful speculations in the sector. 

"It's true that locally we have a solid conservative banking model, but at the present time there is no regulation that safeguards the consumer. After all, SMEs are exempted from the Financial Transactions Tax, thus 90% of the local stakeholders will be unaffected," Cassola said, although this declaration was heavily opposed by members of the audience. 

Bank Of Valletta's Aldo Scardino underlined that the local banking sector was very conservative and that after the recession, the local banks underwent the same scrutiny which bigger foreign banks had gone through. He also expressed his doubts that the FTT would lead to greater consumer protection. 

The FTT was proposed by the European Commission in September 2011 to ensure that the financial sector made a fair and substantial contribution to public finances. The proposal is backed by the majority of member states, including Germany and Italy. 

Cassola then pointed out that the introduction of the FTT would mean a reduction of Malta's annual contribution towards the EU, which currently amounts to around €70 million. 

However, Kenneth Farrugia from Finance Malta promptly intervened and said that Cassola's financial estimates were wrong since studies showed that with the introduction of the FTT, Malta would lose 18% of its tax revenue. 

"This would mean that the government would need to seek alternatives to collect the lost revenue," he said.

Stakeholders' representatives remarked that more regulation would be an additional burden, and that consequently Malta would lose its competitiveness that set it apart from other EU states. 

"This is a global matter: should the EU introduce this tax, investors will simply move to other jurisdictions that would harbour them from such taxation. Malta would definitely lose out," Farrugia said.

Both Nationalist and Labour candidates argued on the importance of proportionality and the principle of subsidiarity in order to prevent a negative impact on Malta's economy. 

Labour MEP candidate Cyrus Engerer concurred with the stakeholders and said that Malta would become a net contributor rather than a beneficiary should the proposed EU tax model be adopted. 

Fellow Labour candidate Ivan Grixti remarked that the FTT aims to cut tax avoidance by multinationals operating across EU states, but that national interest forced Malta to disagree with the proposal since Malta did not face the same problems other countries do.

On his part, Nationalist MEP hopeful Ray Bugeja called for self-regulation as the way forward. 

"This sector is too technical to be regulated by the government. Self-regulation should be advocated, in a scenario that should something go wrong, it is you who pay the price," Bugeja said.

Another PN candidate, Kevin Cutajar, underlined the need for continuous consultation between the authorities and stakeholders, adding that additional regulations should be industry-driven.