Malta is at present negotiating 10 double taxation agreements, including one with the United States, “which we hope to conclude soon”, Parliamentary Secretary Tonio Fenech said yesterday.
Mr Fenech said that Malta today has 44 double taxation treaties in force, 24 of these are with European Union member states, while the rest are with OECD member states and countries with emerging economies.
Speaking at a seminar on double taxation, organised by the Malta Institute of Management, Mr Fenech said these treaties are viewed as beneficial economic instruments by most states conscious that cross-border trade, commerce and investment can only foster and grow if businesses are allowed to transact with a degree of certainty, to the advantage of the individuals, partnerships or corporate entities, as well as of the partner states involved.
“Double taxation treaties have played an integral role in the development of Malta’s economy since it became independent in 1964. These international agreements have allowed tax issues with partner countries to be clarified, international double taxation to be avoided, and fiscal evasion to be curtailed,” he said.
On another level, he added, “they have helped Malta develop trade relations with other countries, assisted the flow of inward direct investment and served as an important platform for Maltese residents doing business in partner countries”.
Mr Fenech said that successive Maltese governments have been very active in building up this treaty network to where it stands today, although the underlying economic rationale has shifted over the years to reflect the thrust of the country’s economic policies.
The total number of double tax treaties worldwide, as recorded by UNCTAD, rose from just under 500 in 1990 to around 2,500 in 2004, he said, and these have come to be seen as an added tool in the inward investment promotion armoury of countries with an already developed and diversified economy.
“The increased impetus for the negotiation of treaties on Malta’s part over the last 20 years also reflects their growing appeal across the world.”
Turning to Malta’s EU membership, he said the country also increased its efforts to finalise tax treaties with the remaining members as well as prospective member states, in an endeavour to ensure that on accession it would have a complete range of treaties aimed at achieving effective double taxation relief in trade relations across the EU.
“Double tax treaties have thus also become a vital tool in Malta’s drive to increase the level of cross-border business not just in the export of goods – a market that was already open to Malta before accession – but also in services and capital movement, both of which were seen as the future growth areas both of the Maltese and of the pan-European economies.”
The parliamentary secretary also spoke about a number of issues of relevance to Malta both from an international business perspective as well as from a national economic standpoint.
Concluding, he said that Malta in the EU will continue to stand for the elimination of economic double taxation ensuring that business profits are never taxed twice – that is, first in the hands of the company and then in the hands of the shareholder.
“Just as importantly, preserving our imputation system also means that our double tax treaties remain unaffected, that any misconceptions regarding the harmfulness of our system have been dispelled, and that the system’s acceptability from an international standpoint remains unassailable,” Mr Fenech said.