Unilateral EU measures must not end up damaging EU companies – Scicluna

Finance Minister Edward Scicluna yesterday warned that unilateral EU measures must not end up damaging EU companies. His statement comes after the future EU corporate taxation of the digital economy was discussed during ECOFIN meetings in Tallinn on Thursday and Friday.

Scicluna said, “Given the global aspect of digitalisation of our economies, Malta suggests that any EU proposals in the area of taxation should serve as input into OECD global discussions. It is important not to let unilateral EU measures end up damaging EU companies.”

The European Ministers for Finance discussed the priority actions in the economic and financial areas which should be implemented to foster sustainable growth and re-launch the economic and financial integration in the euro area.

The discussions focused on initiatives to be taken in order to complete the Banking Union and continue the process of a Capital Markets Union with, cross-border savings and equity investment flows and the adoption of a more efficient and consistent regulation.

Scicluna added, “Malta agrees to the current European Stability Mechanism (ESM) evolving into a European Monetary Fund. The Institution would be able to assist the Eurozone countries converge further and implement risk- sharing programmes.

“Whether the EU budget can and should provide a stabilisation mechanism within the Eurozone is an open question which will be debated in a post Brexit EU budget discussion, but it is quite difficult for a post- Brexit budget of a 1% EU GDP to take on this role.”

The charge for a new system of corporate taxation of the digital economy is reportedly being led by France, which aims to ensure that digital companies such as Amazon and Facebook pay their dues.

French Finance Minister Bruno Le Maire reportedly insisted that the bloc should agree to a tax on the digital industry by mid-2018 as a matter of fairness. Ten countries, including Germany, Italy and Spain, have formally backed the initiative. Eight others have reservations, he said, led by Ireland.

“The very, very considerable difficulties in taxation of this sector became clear at this meeting,” Irish Finance Minister Paschal Donohoe said yesterday, explaining that any such levy should include the US and other Group of 20 countries. Ireland, he said, joined other nations in raising “very big questions about how such a measure could be implemented”.

Traditional taxation practices have failed to capture business from an industry where value added tends to be virtual rather than material and digital companies have sought to take advantage of loopholes created by uncoordinated European regulation. Yet the opposition matters because the EU requires unanimity among its 28 members to implement tax policies.

France has proposed a temporary levy on revenue be- cause taxing profits is complicated under international rules. Implementation of a new policy would take years, meaning it could be a while before any money was actually raised.

Danish Finance Minister Kristian Jensen warned that a European tax could risk driving business abroad. “I’m always sceptical about new taxes and I think that Europe is taxed heavily enough,” he said. The digital industry is “the future”, he added.