Finance Minister Clyde Caruana has suggested that the initial features of what is expected to be a comprehensive reform in Malta’s taxation system may start to be rolled out as early as next year.
However, any changes are likely to take a few years to be introduced in their entirety, with Government mindful of the impact such a shock could have on the local economy.
Speaking during the launch of Malta’s new financial services strategy, the Minister told attendees, “I prefer swallowing the bitter pill now and introducing changes to the corporate tax regime gradually than having the EU chasing us or even imposing changes on us.”
Last October, Minister Caruana made it clear that global plans for a minimum corporate tax rate did not have his support.
“Am I in favour of tax harmonisation? No, I am not, for the simple reason that we are an economy at the periphery of Europe. The one size fits all cannot be there for everybody to fit into,” he said.
The proposed EU-wide minimum corporate tax rate is expected to be of around 15 per cent – far higher than the five per cent many foreign companies based in Malta pay.
The issue was gathering steam prior to Russia’s invasion of Ukraine, which turned Europe’s attention to more immediately pressing matters.
Minister Caruana however made it clear that the issue is not going away.
“The government will not start this new rate as from next year, because of changes that need to be made, but the change will be a gradual one, say over three years. This will affect the economy as a whole so we need to do something that is well-prepared as it is a system we need to live with for the next, at least, 20 years,” he said.
He added that any changes would be designed to be revenue-neutral while retaining Malta’s competitive advantage.
The strategy launched by the Minister on Wednesday (today) morning reflects Malta’s position as something of a passenger in its tax planning legislation.
In the section focusing on long-term actions in the area of tax, the document acknowledges that any reform “will be heavily influenced by the work of the EU and the OECD/G20”.
“It is evident that Malta must remain actively engaged in he development process at the EU level and must comply, in good faith, with that which is ultimately agreed while taking advantage of every opportunity at its disposal to remain competitive in those areas which have been identified to be strategically relevant for Malta.”
The section concludes that, “The specificities of this action point can only be defined as an outcome of a deep study of the options currently being conducted by the Ministry for Finance and Malta’s tax authorities.”
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