“Tax Haven” in Charge: Embattled Malta Takes Over EU Presidency

Written by | Friday, January 13th, 2017

As Malta took over the EU’s rotating presidency at the beginning of the new year, it was immediately accused of being a tax haven since some companies operating in the country pay as little as 5 percent tax on their profits. According to a report commissioned by Green MEPs, EU’s smallest Member State would have been labeled a tax haven if the criteria defined by the European Commission for non-EU countries were applied to the EU. “This is completely unacceptable and raises serious questions for the forthcoming EU presidency,” said Sven Giegold, the Greens’ economic and finance spokesperson.

In theory, Malta has the highest corporate tax in the block but in reality a complex system of tax breaks allows companies to pay even zero corporate tax. This same situation applies to the taxation of dividends received by shareholders, which can also effectively get to the rate of 5 percent for trading companies after all discounts have been applied. In 2012-2015, the country’s regime on dividends generated in foreign countries allegedly deprived other countries of about €14 billion. Malta commented on the allegations that its tax regime had been scrutinized by the EU Commission before the country became an EU member in 2004. “The fact that a country offers competitive tax rates does not make it a tax haven. Indeed, tax competition is something which many jurisdictions, including now the US and the UK, are embracing,” the spokesperson said.

Valetta has also been accused of omitting the issue of tax legislation in its presidency program. However, although taxation is not one of the presidency’s main priorities, it is mentioned in the official texts in fine print. “The Maltese presidency will also carry forward work on a number of ongoing taxation files, most notably the direct tax and indirect tax packages of Autumn 2016. Key dossiers within these packages include the amendment to the Anti-Tax Avoidance Directive and the re-launch of the Common Consolidated Corporate Tax Base,” the presidency program says.

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