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Malta’s tax system harming European solidarity, Austrian Chancellor warns

Christian Kern claims that EU countries with low corporate tax rates are underming the structure of the European Union 

tim_diacono
Tim Diacono
3 September 2016, 10:05am
Austrian Chancellor Christian Kern (left) with Prime Minister Joseph Muscat
Austrian Chancellor Christian Kern (left) with Prime Minister Joseph Muscat
Austrian Chancellor Christian Kern has delivered a damning indictment of the tax systems of Malta, Ireland, Cyprus and the Netherlands, claiming that countries that offer low corporate taxes undermine the EU’s structure.

“What Ireland, the Netherlands, Luxembourg or Malta are doing here lacks solidarity towards the rest of the European economy,” Kern said in an interview with Austrian newspaper Der Standard. 

While the statutory corporate tax rate for corporations in Malta is 35%, shareholders can take advantage of tax rebates when the company’s taxed profits are distributed amongst themselves. This rebate on their dividends reaches as high as six-sevenths of the tax paid by the company, effectively reducing shareholders’ tax burdens to 0-5%.

The government recently voiced concerns that the system could take a hit by an anti-tax avoidance package published by the European Commission in January to fight base erosion and profit sharing, that will work towards a common EU position on tax havens. Finance minister Edward Scicluna pledged to resist any attempt by the European Commission to reduce sovereignty over its fiscal affairs, a stance that was supported by the Opposition.

In June, Scicluna announced that Malta will accept an updated version of the anti-tax avoidance directive, following amendments to the text that he said will safeguard the country’s general system of taxation and the competitiveness of its financial services sector.

In his interview, Kern said that multinational corporations like Amazon and Starbucks pay less tax in the country than a local sausage stall.

“Every Viennese café, every sausage stall stand pays more tax in Austria than a multinational corporation,” Kern said. “That goes for Starbucks, Amazon and other companies.”

He praised the European Commission’s recent decision to order Ireland to recover €13 billion in undue tax benefits from Apple, a decision that both Ireland and the tech giant have pledged to appeal.

Following a long investigation on Tuesday, the EC ruled that Apple should pay the €13 billion in extra tax, plus interest, to the Irish government because a long-standing tax deal with the US tech giant amounted to illegal state aid.