“We will defend our tax regime – we will explain, discuss and compromise – but we will defend it,” Finance Minister Edward Scicluna said against a backdrop of mounting global pressure to clampdown on multibillion companies avoiding tax.

Professor Scicluna addressed the 2016 annual tax conference which took place yesterday, entitled ‘towards a fair and efficient tax system?’

Malta has come under growing pressure by European Union for offering preferential tax agreements, which was sparked by the Luxleaks scandal. In November 2014, the International Consortium of Investigative Journalists (ICIJ) revealed a number of Luxembourgish tax rulings which were offered to over 300 cross-border companies – these rulings were previously secret and exposed how these multimillion companies have been employing aggressive tax practices to avoid paying their fair share through the assistance of countries such as Luxembourg.

The difference between how Malta has been offering preferential tax agreements as opposed to other member states such as Luxembourg is that it does not offer tax rulings. This refers to a country’s ability to negotiate a taxation agreement specific to a cross-border company. Another area where Malta differs is that it publishes all taxation agreements and does not offer hidden tax credits.

 “We are clearly showing that Malta is serious about tax avoidance on a global level, however what we are defending – and we have every justification to do so – is our sovereign choice to keep our tax regime, which is what you see what you get.

“We do not have tax rulings like certain countries have for one company against another, or hidden credits. In addition to this, we are more restricted than The Organisation for Economic Co-operation and Development (OECD) is suggesting regarding interest. It is our country which will decide what level of taxation we want to impose, without distinction.”

He went on to speak about why it is important for taxation not to be overly burdensome, and why it is necessary for Malta to set its own tax rates:

“From an economic point of view, taxation should interfere as little as possible with the individual’s choices. It is bad enough that you require citizens to contribute to goods and services that you want to consume collectively – and that’s fine – but at least do not place an added burden. The bottom line is that tax should not be interfering with an individual’s [purchasing] choices.”

He further elaborated that it is within a sovereign country’s remit to choose whether they want to boost private consumption or the consumption of public goods, by lowering or increasing taxation respectively.

With regard to country-by-country reporting, which refers to multinational companies drawing up reports on the operations of each country they operate in, Professor Scicluna believes that this information should be limited towards a country’s tax authorities.

“Country by country reports should be at the level of the tax authorities, we do not want to push sensational reporting to the media so that they decide which companies they are going to name and which they are not. The media has its own responsibilities but it can also turn into a circus, internationally speaking.”

Civil society has argued that while Malta is fighting to retain its fiscal independence – which has been an important source of revenue in the light of practically no natural resources and a relatively small workforce – the involvement of Minister Konrad Mizzi in the Panama Papers scandal has undermined Malta’s credibility to defend itself.

While the Panama Papers scandal deals with a separate issue – the purchase of secrecy as a commodity by the world’s elite – the financially secretive jurisdiction of Panama allows for tax avoidance and aggressive tax planning.

The publication of 11.5 million documents of Panama-based law firm Mossack Fonseca’s dealings with clients has reignited pressure for more global financial transparency.

Professor Scicluna stressed however that the fight for more transparency and fairness cannot be dealt with one particular region of the world, but has to be a global effort in order to be truly effective.