Euro

France and Germany reiterated their backing of a “historic” agreement mandating a minimum tax rate for multinational corporations on Wednesday after Ireland expressed opposition to the plan this week.

It comes as reports have suggested that the Group of Seven (G7) countries are close to reaching a deal on the matter, with the Financial Times reporting that the deal could be reached as soon as Friday.

However, the deal may have hit an obstacle this week when Ireland, which is not a member of the G7 but is represented by the EU which participates as a guest, came out against the deal with its Finance Minister expressing “significant reservations”.

However, the set-up of Ireland’s own tax system, which has been characterised as a “tax haven”, might throw the veracity of its protestations into doubt.

According to the UK-based Tax Justice Network, for example, Ireland is the fourth-worst offender in Europe in terms of tax losses inflicted on other countries, which according to the network, stood at €13.5 billion annually in 2020.

Despite the opposition, officials from France and Germany remain optimistic about the proposals, with French Finance Minister Bruno Le Mair declaring that change of US administrations offers a “historic opportunity”, that must be acted upon.

His German opposite Olaf Scholz agreed, saying he was optimistic about the chances of reaching an agreement which would end “disastrous fiscal competition between countries”.

It is a deal that could be especially pertinent for Malta’s tax jurisdiction.

Malta has long benefitted from a 6/7 tax refund scheme allowing companies registered in Malta with foreign ownership to effectively pay five per cent corporate tax. 

The scheme has been in place prior to Malta’s accession to the EU and has attracted large multinationals to the island. It has also attracted criticism by other EU jurisdictions for ‘taking’ taxable income from countries where the majority of profits are being earned.

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