European Green party implicates Malta in BASF tax avoidance case

An investigation into the German chemical company BASF’s tax practices has implicated Malta in what the Greens–European Free Alliance (Greens/EFA) called “aggressive tax planning strategies that exploit mismatches in national tax systems.”

The report, based on original research by Greens/EFA, estimated that BASF has used these tax planning strategies to avoid €923 million in tax over the five-year period since fiscal year 2010.

"It is a pity that the name of Malta crops up when the issue of tax avoidance comes up. The Panama Papers scandal has unfortunately seen the involvement of a former Maltese Minister, Ninu Zammit; of a present Minister, Konrad Mizzi; and of the present Prime Minister's Chief of Staff, Keith Schembri. This, unfortunately has contributed to the focusing of attention on Malta's financial services,” party Vice-President Ska Keller said. “But this is not the only episode. We European Greens have commissioned an investigation on the German company BASF. The results are scandalous and, unfortunately, together with Belgium and Holland, Malta is also involved in this other instance of tax avoidance."

The report states that in 2006, BASF disclosed the existence of a new Maltese subsidiary with €5.07 billion in assets. It continues by saying that at the end of 2011, BASF apparently transferred these assets to a new German subsidiary, BASF Finance Malta GmbH. “This “German” company is managed entirely from a rented office at the Mayfair Business Centre in St. Julian’s, Malta – and therefore eligible for Malta’s preferential tax regime,” the report reads. “BASF Finance Malta GmbH’s assets consist entirely of loans to undisclosed BASF Group companies. This implies that the company’s income consists of tax-deductible interest payments from BASF subsidiaries, which could facilitate profit shifting from higher-tax jurisdictions.”

On his part, Alternattiva Demokratika chairman Arnold Cassola said that it is unethical for multinational corporation to avoid paying taxes where they are due because of the effects this has on public sectors.

"The BASF case again highlights the issue of tax avoidance. We Greens of Alternattiva Demokratika believe that it is unethical; Less due taxes collected means less public investment in the public health, education, ecological and social sectors. The Luxleaks, Swiss Leaks, Panama Papers and Bahamas papers are bringing to light scandals of corporations, politicians and other individuals who have been dodging taxes at the expense of the common good," he said.

Cassola urged Malta to distance itself from “practices which can be seen as an encouragement of tax avoidance”, pointing to previous strides.

“We Maltese have the experience and the intelligence to innovate. In the past we moved from "offshore" to "onshore"; we created from nothing our maritime flag, our pharmaceutical industry, our aircraft servicing industry. Now is the time to start distancing ourselves from the dubious tax avoidance practices and branching out into new areas that will keep our economy vibrant and create new jobs, whilst safeguarding the ethical, social and environmental dimensions."