The Malta Independent 22 February 2020, Saturday

Fighting a retreating battle

Thursday, 16 May 2019, 10:34 Last update: about 10 months ago

It is with general surprise that public opinion in this country now finds that a principal theme in the current electoral campaign has focused on the EU and sovereignty in taxation.

Surprise because the two parties have exactly the same stance and have been reiterating this for aeons. Yet they find something on which they differ and they clobber each other over the head about it.

Regardless, as in other cases where they are at one, they may both be mistaken.

It is true that Malta, at its EU accession in 2014 insisted and obtained that taxation would be a sovereign matter. So did the other countries.

Malta is not alone in this. Countries like Belgium, Hungary, Luxembourg and the Netherlands and others all have favourable tax regimes with which they attract investment. A country like Luxembourg is famous for its cosy relationship with big multinational companies drawn up when Jean-Claude Juncker was prime minister of that country.

But now there is a trend that is getting stronger that is in favour of removing the different tax regimes and instituting one common regime for all.

This is what the local dog fight is about: the PN MEPs claim that the Socialist candidate for the presidency of the Commission, Frans Tindermans, has inserted in his electoral programme a commitment to bring about one tax regime for the whole community.

But whatever there is, or is not, in the EPP manifesto, it is indisputable that the same trend to enforce one tax regime exists outside the PES ranks. There are many reasons for this - the last financial crisis is not over yet and although the euro has been saved, notably by ECB's Mario Draghi, the whole EU financial system is still far from secure. Banking union, another big problem, is still not here.

And among the many suggestions to outline the way forward, the suggestion to get one tax regime is making itself heard more and more.

Over the past months, revelations and leaks have uncovered the vast skein of tax benefits that companies get from registering their companies where there are tax systems that are lenient. Huge companies have been found to have been defrauding the countries where they operate (as against the countries where they are registered) of legitimate taxes, that are paid by millions of citizens.

In this, we may add, Malta has been portrayed as one of the delinquent countries though no proof has been adduced to show that Malta has been helping foreign companies shirk from paying taxes in the countries where they operate. But the many cases out in public domain with regards for instance to Pilatus Bank, Panama Papers, etc. have undermined trust in Malta's integrity. Meanwhile the other countries, like those mentioned earlier, get less negative press and carry on keeping multinationals happy.

Will this trend to enforce uniform tax rates across Europe become law? The trend is strong but then the countries flaunting it are strong too. Malta must get out of the limelight as soon as it can. It must hide its opposition to what may be proposed behind the opposition of bigger countries instead of doing what attracts attention, such as, for instance, vetoing some changes.

It is quite clear that there are also some very good reasons why Europe should be one tax regime: it will help, for one thing, to enforce free movement - of persons, of companies, of investment. And people in the financial sector must get to make money not through helping companies pass through the hoop but rather through engendering real sustainable growth.

Instead of this stupid dog-fight on who is against uniform tax regimes, when everybody is, let us concentrate on real issues and get down to doing what is good for the country.

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