Parliament on Wednesday discussed a bill amending laws regarding the financial services sector, bringing Malta in line with EU regulations with respect to a sector that generates some 12 per cent of GDP.
The amendments espoused in the parliamentary sitting related to certain reservations the European Commission had about the company taxation system in Malta, fearing it might promote a predatory system or an unjust one that would put Maltese companies at an advantage over those in EU member states.
Yet through negotiations, Malta managed to secure the use of the Full Imputation System, which means that all dividends are taxed at 35 per cent, and where tax owed is less, the shareholder may choose as to whether or not to accept the refund on the amount overpaid, explained Parliamentary Secretary in the Finance Ministry Tonio Fenech.
“The system will be slightly different, but at the end of the day, the investor will still have the same amount of pounds, shillings and pence in his pocket in the form of profits,” confirmed Jose Herrera, opposition spokesperson on financial services.
The aim of the laws is to provide a solid foundation of legislation that would allow the country to still be attractive, possibly even more so, to foreign investors. Both MPs did emphasise however that sound law and structure were not the only investment “attraction” factors.
Mr Fenech mentioned initiatives within educational facilities to promote job-taking within the sector, as well as the public-private partnership created to market this all-important sector to possible foreign investors. He also highlighted the fact that the laws which regulate companies as well as their shareholders, became effective as from 1 January, yet entities using the old taxation system had until 2010 to adjust.
Dr Herrera reminisced about bygone days, where Malta had to learn to stand on its own two feet after the departure of the English regime; welcomed changing times where steering a country with political agreements and subsidies was no longer the political trend; and praised the Parliamentary Secretary, and all those who worked within the sector, on one of the finest bills yet presented to the House.
He envisaged a day when the financial services sector would “explode” and stressed the importance of investment, due to its “Big Money” potential, promising it was high on the priority agenda for an MLP government.
Nevertheless amid this tumult of praise and congratulation, a discord had to be heard regarding taxation in other areas.
Dr Herrera listed a long table of tax elements, both indirect and direct, which the PN government had implemented over the past three years, accusing that tax had increased 100 per cent since 1999, and that even so, Malta’s growth was still the lowest in the EU, prospects pointing solely to a 0.8-2.3 per cent increase.
This only to later get contradicted by Mr Fenech, who stated that this situation of a needed evil, 25 per cent increase in tax, and three per cent growth, was far better than more than 33 forms of tax being instated in 22 months during the Labour government.
All this aside, Mr Fenech concluded the debate by evidencing that, “this legislation will be an important spring board to attract foreign investors to our country, generating the economy, making the financial services sector the third pillar of Maltese fiscal policy.”
The vote for the bill’s second reading was passed unanimously.