The Finance Ministry has skirted questions on its current position on the introduction of tax harmonisation at an EU level when asked by The Malta Independent.

The focus and discussions at the EU level on tax harmonisation has been recurrent throughout all levels of the European Union since 2016. However when questioned and pressured several times on whether the government had changed its stance on tax harmonisation or whether it opposed to some or all levels of it; the government skirted round such questions stating that there were no proposals for tax harmonisation at the EU level at present.

Yet only four days ago leaders from Hungary and Ireland, rejected any efforts to harmonise corporate and other tax rules across the EU, saying that such moves would damage competition in the single market.

Questions were sent to the Ministry of Finance in regarding an interview carried out by The Malta Independent with a governor from the MFSA Board, Frans Camilleri. In the interview Camilleri stated that Malta was not against tax harmonisation but was simply opposed to tax rate harmonisation.

Such remarks oppose what has previously been stated by both the government and the Opposition. Back in September FinanceMalta reported thatMinister for Finance Edward Scicluna highlighted that “taxation remains a sensitive area for Malta, not only because of its obvious role in the revenue collection process, but also as an important policy tool to direct economic activity”. He added that “coordinated efforts in the fight against tax fraud and tax evasion will be supported by Malta, but in this work, we need to avoid any embedded push towards tax harmonisation”.

Malta not unlike other small states, due to its small nominal size in regard to territory wealth, resources, power, economy etc; relies on niches such as attractive tax systems. Being a lower tax jurisdiction Malta attracts much overseas investment. Currently corporate taxis at the standard rate of 35 percent in Malta however due to the distributions of dividends, foreign shareholdersare entitled to the now infamous 6/7 tax rebate effectively allowing multinational corporations registered in Malta to pay five per cent corporate tax.

Maltese MEP Alfred Sant when invited to address a conference entitled "Building an EU tax system" by the European Tax Adviser Federation (ETAF) in Brussels, in December 2017has expressed his support of tax transparency measures, while objecting to proposals for tax harmonisation measures at EU level

Dr Sant has also recently spoken in the European Parliamentof the damage EU tax harmonisation can do to Malta. Stressing that this will end up harming bordering states who have very few economic niches to offer to continue to fuel their economic development, “smaller and peripheral Eu countries should not be denied the flexibility that they still enjoy in tax matters,” he said.

Furthermore, Nationalist Party leader Adrian Delia also expressed his party’s support for the government position against tax harmonisation at an EU level.

He stressed that the major challenge is more political than anything else, stating that the PN’s position is in line with government, refuting tax harmonisation at an EU level. Dr Delia was referring to political pressure at an EU level for the 27-member-bloc to implement supranational tax harmonisation policies and have companies pay tax on profits where their major operations are – a move that would take away a sizeable portion of government revenue.

Since the LuxLeaks revelations in 2014, where it was found that Luxembourg was offering secret sweetheart deals to multinational corporations by agreeing on very low corporate tax rates, calls across the EU were made to curb what other member states have called an abuse of the system.

The argument centres around certain member states offering advantageous corporate tax rates which effectively siphon off government revenue on taxation on company profits from those countries where multinationals are earning the majority of profits.

Subsequent scandals such as the Panama Papers revelations strengthened those calls, with the EU pushing for measures to force multinational corporations to pay their taxes in the countries where they are earning their profits.

Malta has been, among a minority of countries, against the measures, which is widely seen as a precursor to discussing tax harmonisation.