Malta called-out as a tax haven as its EU presidency begins

Following a new report, Malta has been actively labelled as a tax haven.

The findings revealed that the smallest member of the EU state-aided multinationals to help them avoid paying a staggering 14 billion Euros in taxes during the period of 2012-2015.

Malta, which has a population of just 430,000, took over the EU’s rotating presidency on January 1st – a role which will last for six months.

A report, commissioned by Green MEPs in the European Parliament, accused the country of functioning as a tax haven as classified by the EU’s own criteria.

Sven Giegold, a German Green MEP and tax campaigner, is quoted by British newspaper The Guardian as saying that ‘The tax system in Malta is generous to say the least, with large companies routinely paying as little as 5% tax on their profits. This is completely unacceptable and raises serious questions’.

The report also claimed that despite Malta claiming to have the highest corporation tax in the EU at 35%, the country boasts an elaborate regime of tax breaks for intellectual property, which amounts to ‘aggressive tax planning’. This therefore permits some companies to pay zero corporation tax.

In April of last year, the Maltese prime minister Joseph Muscat faced calls to resign following the leaked Panama Papers scandal. This revealed that two of his strongest allies had offshore accounts, including health and energy minister Konrad Mizzi.

More than 11 million files disclosed from Panamanian law firm Mossack Fonseca revealed that the wealthy and powerful from around the globe avoid paying tax by using offshore shell companies registered in tax havens – such as Malta.

In reaction to the report, the EU has announced a plan to compile a ‘blacklist’ of said tax havens.
While Malta is one of the 25 EU-member that have signed a deal to enter a confidential beneficial ownership register – which would automatically share information on the ultimate owners of companies – critics are of the opinion that Malta may lack the strength to clampdown on tax avoidance during its time in office.

In October of 2016, Malta was upgraded by Standard and Poor’s for the first time in 20 years from BBB+ to A- as result of strong economic and fiscal growth. Whether this rating can be maintained with the potential onslaught of new regulations will remain to be seen.


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