Malta risks losing its competitive edge as a financial services centre – as well as a significant portion of tax revenue – if proposals including a common corporate tax base and a financial transaction tax become EU law, financial sector professionals warned today.
European election candidates and representatives of Malta’s financial sector participated in a roundtable discussion organised by the European Parliament Office in Malta on financial taxation and the future of financial services in the EU.
The main issues proved to be the proposed Financial Transaction Tax and the proposed Common Consolidated Corporate Tax Base, and the financial sector professionals present all expressed their opposition to the two.
Their view was largely shared by Labour Party candidates Ivan Grixti and Cyrus Engerer, as well as Nationalist Party candidates Kevin Cutajar and Ray Bugeja.
However, Alternattiva Demokratika chairman Arnold Cassola proved to be a dissenting voice, as he endorsed the European Greens’ position in favour of an FTT, arguing that this helped address financial speculation whose victims, he pointed out, included Maltese investors encouraged by local operators to invest in high-risk schemes which went bust.
Prof. Cassola also noted that the FTT would reduce Malta’s direct financial contribution to the EU, only for Finance Malta chairman Kenneth Farrugia to point out that the tax would reduce Malta’s tax revenue by driving financial services companies away.
On the other hand, Labour and PN candidates insisted that taxation was a national issue and should remain so.
The CCCTB would establish a single set of rules that companies operating in multiple member states would use to calculate their taxable profits. These rules, however, would see Malta lose out on tax revenue from companies which are based in the country but whose customers are largely based across the EU.
No candidates backed the CCCTB presently being proposed, but Prof. Cassola insisted that the greens shared the financial sector’s concerns at the system being backed by the two largest political groups in the European Parliament – those PN and Labour belong to. He noted that the European Greens favoured a minimum harmonised tax base, but one which would be flexible enough to account for peripheral economies – including Malta.
But Mr Engerer insisted that Malta would be a net loser if the CCCTB was implemented, and also said that he was worried at Prof. Cassola’s quoting of the European Greens position. He noted that while his party’s MEPs belong to the Socialist group, they do not necessarily accept all its positions.
Another issue raised by financial sector professionals was over-regulation, which, they said, left small countries such as Malta at a disadvantage.
Mr Bugeja, who noted that he has been involved in the sector for years, pointed out that regulators rarely understood the intricacies involved, and that while the sector has been inventive, it has not always been aware of the risks of individual traders’ inventiveness. He insisted that the sector should be self-regulated, but also self-insured, and foot the bill if things go wrong.
Mr Grixti, on his part, emphasised that consumer protection on its own was insufficient, arguing that Maltese investors were far from being sufficiently educated. He also insisted that the EU should focus on tax avoidance before delving deeper on the proposed law.
Dr Cutajar, a commercial lawyer by profession, described over-regulation as one of the greatest burdens the sector faced and the prospect of further regulation as its greatest fear. He also emphasised the need for constant consultations between the sector and politicians.