The Malta Independent 23 July 2019, Tuesday

The David and Goliath syndrome – facts about the common tax base

Marlene Mizzi Thursday, 29 March 2018, 07:52 Last update: about 2 years ago

There has been so much vague media conjecture on the issue of an EU common consolidated corporate tax base -CCCTB, overwhelmingly voted for in a recent session of the European Parliament, that ones feels the need to clarify things for local tax-payers and investors who may feel, quite understandably, somewhat lost.


The impression that the European Parliament vote in any way means that Malta and the other member states opposing it now have to comply cannot be farther from the truth. Tax matters within the European Union are not governed by the process of codecision between the Council and the European Parliament as are other issues upon which there is mutual agreement. Tax remains solidly the prerogative of every member state and any new pan-European taxation measures will continue to be subject to the standard requisite of unanimity.

This and other realities, such as big-nation muscle being flexed to make up for higher corporate taxes due to massive public sector spending, need to be borne in mind before anyone seeks to shed any needless doubt on Malta’s and other member states’ resistance to a common consolidated corporate taxbase. The inevitable impact from an excessive public sector expenditure prohibits the prime movers behind the idea of a common tax from doing the sensible thing by reducing their current rates! To give just one example, suffice to say that while Germany’s public sector bites more than fifty per cent of its Gross National Product, in Malta’s case it is just thirty-eight per cent. Hence the two countries’ taxation requirements unavoidably vary considerably. It is why Germany and France are disinclined to heed the call for them to reduce their corporate taxes rather than expecting the smaller, less handicapped member states to agree to a common tax rate.

One other extremely important reality is the fact that fighting the issue of a common EU tax does not mean any one country is against the need for more transparency and the staging of a continuing battle against tax evasion and money-laundering. Opposing a regime which is detrimental to our economy, is not being against transparency and accountability. It is being, with valid reasons, against a one—size- fits all system which benefits some counties but not others. This is another truth that must be hammered home in the face of some unfortunate but hardly knowledgeable media coverage of the issue.

It is to be admitted that pressure from Lux Leaks and Panama Papers revelations concerning tax evasion and presumed tax evasion has hit all European countries, including Malta. But to use one issue to impose another is certainly not the right way of finally reaching a policy that will better safeguard the global and European financial sectors. To do so would mean sowing discord and confusion instead of harmony and unity at a time when the European Union and its member states most need them.

I am proud to have voted, with the other two Labour Party MEPs, against a common corporate tax when the issue was submitted for the judgement of the European Parliament. The same did those MEPs from other member states which are highly aware of the need to protect their national interests, regardless of territorial and/or parliamentary size. Our stand is in complete conformity with the European Union Treaty. The absolute reality is that Malta and other member states will continue to abide by that treaty while they object to the introduction of a common EU corporate tax.

Prof. Edward Scicluna, our Minister for Finance and a highly respected professional at both European and international levels, recently gave yet another example of how small member states need to be on their toes all the time to make sure they are not driven away by the bureaucratic avalanche that the European Union can sometimes be, even with regard to issues much less controversial and divisive than that of a common European tax.

In his usual convincing style, Prof. Scicluna publicly referred to the “lesser” issue of VAT being imposed on visiting yachts at our marinas and how this also has been badly covered by some sectors of the media. He went into details as to how the system works, involving records as to how much time a yacht has spent in and out of European waters. It is a system agreed upon ten years ago between Malta and the Commission which now seems to be putting forward a demurrer over it.

An even stranger reality about this issue, however, is that both Italy and France have a similar VAT yacht-taxing system based on the complicated movement of yachts in and out of European waters, but neither have been subject to the same objections raised by the Commission. Is this is yet another example of big-nation muscles being flexed in the wrong direction? I think so, but a sense of duty towards our own nation and its interest will give us enough adrenalin to keep fighting the David and Goliath syndrome which we are facing so often in the European Parliament.  

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