Minister positive Malta can negotiate its position on international minimum taxation

Malta needs to be open to negotiations with other countries regarding the international minimum level of taxation, Finance Minister Clyde Caruana said, adding that he is sure that the country will not “give up what it has achieved throughout the past decades.”

130 countries and jurisdictions joined a new two-pillar plan to reform international taxation rules and ensure that multinational enterprises pay a fair share of tax wherever they operate. The Organisation for Economic Co-operation and Development (OECD) and the G20 have been working for the past two years on an international tax reform to address the taxation of the digital economy. The new minimum tax rate of at least 15% would apply to companies with turnover above a €750 million threshold, with only the shipping industry exempted.

Speaking at the FinanceMalta’s annual conference about the international minimum level of taxation, the minister remarked that back in January he said that the country should be “agile and wise” in the way it negotiates with this deal.

“It was becoming evident that what was happening at an international level most probably would challenge our tax regime,” he said.

The minister reiterated that what he said back then still stands, especially right now with the way things are evolving at OECD level.

The minister noted that he has been involved in discussions at different levels for the past eight months, and he remarked that he has “never seen the EU working at such a fast pace in order to enact something.”

“The way in which the OECD is negotiating with other countries is that if there are any countries that are completely against this new idea, those countries are being told to leave the negotiating room and let the others decide. So we cannot, from our side, just say that we do not agree with this, for the simple reason that doing so would mean that we would be completely excluded from the negotiations,” the minister observed.

He noted that the country should be wise enough to understand what others are after, “because if we understand what others are after, the other countries will understand what we are after.”

“At the pace at which such reform is being negotiated, I am quite sure that most of these countries would be willing to negotiate in order to ensure that this reform ultimately gets over and done with. In this spirit, I think that as a small nation together with other small countries, we can also negotiate and make sure that what we have achieved so far remains,” he said.

Regarding the FATF greylisting, the minister said that the country “should not feel discouraged, but rather this should give us an incentive to work harder so that our financial sector emerges stronger.”

The minister remarked that over the past two years, Malta made significant strides to address financial regulatory shortcomings, so much so that the country passed the Moneyval test a few months ago. “Unfortunately, two out of the 50 indicators were deemed not to have delivered sufficiently enough by the FATF,” he said.

“A lot of work has been done. This is the message that all of us should convey, even to third parties especially abroad… we need more time in order to ensure that what we have legislated throughout the past months starts to bear fruit,” the minister said.

Regarding the Maltese economic recovery from the pandemic, the minister once again reiterated that no higher taxation will be introduced in Malta.