European Union leaders yesterday sought to advance their fight against tax fraud and close the loopholes for large corporations' tax avoidance schemes.

European officials say tax fraud costs the 27-nation bloc an estimated €1 trillion a year at a time when much of the bloc is in recession and governments are forced to tighten their budgets despite record unemployment. 

The same research has shown that Malta’s public coffers are losing out on as much as €577 million in taxes a year to underground economic activity on which taxes are not collected, or 27.2 per cent of the country’s annual tax income. 

Moreover, estimates are that Malta’s underground economy is worth €1.686 billion a year, over 25 per cent of the country’s entire Gross Domestic Product, meaning that over one-quarter of all economic activity in the country takes place under the figurative table.

Speaking in the wake of yesterday’s Prime Minister Joseph Muscat sounded optimistic of reducing Malta’s deficit to below the three per cent threshold, and expressed his determination to reach the target irrespective of the looming prospect of Brussels initiating a new excessive deficit procedure against Malta.

Dr Muscat said that Malta said that he is not interested in turning the issue into a political football by blaming the previous administration, which had predicted that Malta would have ended 2012 with a 2.3 per cent deficit.

But he said that according to International Monetary Fund sources he had spoken with, prominent figures “who up to last March were in government tried to instigate the IMF to take steps against Malta by putting the country in a bad light”.

Pressed to reveal further details, the Prime Minister said that “it is now the turn of the media to ask the questions to the Nationalist Party”.

British Prime Minister David Cameron meanwhile said yesterday the EU has to be sure “that companies pay taxes and that means international collaboration, sharing of tax information.”

The meeting comes as the row escalates over the amount of tax paid by high-tech multinational corporations such as Apple, Amazon and Google.

The bloc's heads of state and government focused on the tax issue at their short afternoon summit Wednesday. The discussions follow an inconclusive meeting of finance ministers last week, which failed to agree on an automatic exchange of banking information between all EU countries to catch tax-evaders.

On the way into the meeting, leaders were hopeful of persuading Austria and Luxembourg, the two EU countries that pride themselves on their banking secrecy, from withdrawing their objections to the cross-border initiative.

“We will be able to decide crucial steps,” said German Chancellor Angela Merkel.

“There will finally be an exchange of the necessary tax data and there will be negotiations with third countries,” she added, referring to talks with non-EU members such as Switzerland to accept a similar automatic information exchange.

“That is a great leap forward but we're not yet at the end,” Merkel said.

Austrian Chancellor Werner Faymann indicated his country was in principle prepared to give up its banking secrecy for cracking down on tax cheats.

“I expect that we will achieve this data exchange by the end of the year,” Faymann said. “All those who were betting on us fighting over this for so long to grant tax fraudsters a completely easy game (...) will be proven wrong,” he added.