Mossack Fonseca: Malta Refuses to Cede Tax Sovereignty

Mossack Fonseca - In response to the European Commission’s (EC) new anti-tax avoidance package that addresses base erosion and profit shifting (BEPS), Malta’s Finance Minister, Edward Scicluna, insists that his country will not cede tax sovereignty to the EC. Malta will resist any attempt by the EC to reduce sovereignty over its own fiscal affairs, he pledged.

BEPS refers to tax planning strategies that exploit gaps and mismatches in tax rules to artificially shift profits to low or no-tax locations where there is little or no economic activity, resulting in little or no overall corporate tax being paid.

In rebuttal to the EC’s anti-tax avoidance package, Minister Scicluna made the following points:

• Malta is not ready to accept any form of tax harmonisation or any changes to their tax system. He considers this a “red line” that no one will be allowed to cross.

• Malta condemns tax evasion, and is therefore ready to cooperate to reach an agreement that will enhance tax transparency and improve the exchange of tax-related information between EU member states.

• Malta’s relatively low taxation rates in and of themselves shouldn’t be considered an abusive, harmful or unjust practice―there is nothing wrong with better tax planning―which mustn’t be confused with tax evasion.

• Malta won’t be alone in its fight against proposed tax harmonisation―other European countries, including the United Kingdom, share a similar stance.

The Minister went on to say that he has already used the threat of a veto to force the EC to modify certain clauses within the BEPS proposal, including a phrase that proposes “a common but flexible approach”.