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German MEP in spat with Edward Scicluna over tax avodiance report

Panama Papers MEPs have requested an exchange of views with Edward Scicluna

matthew_vella
Matthew Vella
17 January 2017, 7:00am
Finance minister Edward Scicluna said Malta should stop feeling guilty about tax competitiveness
Finance minister Edward Scicluna said Malta should stop feeling guilty about tax competitiveness
An open letter to Finance Minister Edward Scicluna penned by Green MEP Sven Giegold, has called on the Maltese minister to address concerns over Malta’s taxation regime for foreign companies.

The European Greens published a report on the inaugural day of Malta’s EU Presidency, arguing that a system of 85% rebates on the tax due on dividends paid out to foreign shareholders, was unfair for countries who missed out on the tax.

In a letter to Scicluna, Giegold took exception to a tweet by Scicluna who said the report “Is Malta a Tax Haven?” was “unprofessional”, “hotchpotch” and contained “outright non-truths”.

“We would like to assure you that we have demonstrated the highest professional standards in preparing this report, focusing on Malta’s tax system and the consequences as your country takes over the EU presidency for the next six months,” the German MEP said, pointing out that the report was authored by Tommaso Faccio, Lecturer in Accounting at Nottingham University’s Business School. 

“Our findings are consistent with those of the European Commission, who found Malta to be the EU’s fourth ‘top’ facilitator of corporate tax avoidance. If you have evidence of ‘non-truths’ we would invite you to present them,” he said.

Scicluna has hit back at the accusations, saying Malta should “not feel guilty” about competing on taxation, like various US states, the UK and even EU member states, and that its regime was very strict on the exchange of information and anti-money laundering rules.

But Giegold said that the EU would soon start screening third countries to check if they should be added to the future EU blacklist of tax havens. “One of the three criteria is on ‘fair taxation’ and looks at whether countries provide harmful tax measures (such as low taxation). Should we apply two sets of standards then, one for third jurisdictions and one for EU countries?”

The Greens have acknowledged that Malta has committed to OECD automatic exchange of tax information and will implement the OECD plan on ‘BEPS’ (Base Erosion and Profit Shifting) to fight corporate tax avoidance. 

“Let’s not get distracted from the main findings of the report: while we welcome that Malta doesn’t sign any tax rulings, it actually doesn’t really need to because by allowing corporations a super-low tax rate of 5%, Malta already provides very low taxation,” Giegold said.

“By reaffirming your opposition to key, ongoing tax reforms like a common consolidated corporate tax base or public transparency for multinationals, you have confirmed our concerns that the Maltese Presidency will not deliver an ambitious tax agenda over the next six months.”

Giegold said that arguments that such reforms would risk EU competitiveness were no longer applicable after the tax scandals that hit Europe.

Giegold is the financial and economic policy spokesperson of the Greens group and is also a member of the Panama Papers committee.

Edward Scicluna has told MaltaToday that local authorities had “followed up” on both the Panama Papers and Swissleaks, with several companies currently being investigated. “The tax authorities have started 33 investigations into companies linked to the Panama Papers despite there being no cooperation from the ICIJ or even the Panamanian authorities themselves.”

He insisted that Malta should not “feel guilty about being a tax haven because this completely misinterprets the nature of [the country’s] tax regime.” 

He also disputed suggestions that there was a conflict between Malta’s taxation system, which grants 85% rebates on tax charged to foreign shareholders, and the country being tasked with making progress on issues such as tax avoidance and money laundering during the Maltese presidency. “Malta will carry on where the previous presidency left off and will act as an honest broker,” he said.

He was however sceptical about the chances of the common corporate tax base being accepted by all member states. “The CCCTB has already gone through all the phases and failed. Now we are going to try again as honest brokers, being the chair of the council, we will work on it through the process and be very fair in doing so.”

Panama Committee visit

Members of the European Parliament’s committee of inquiry into the Panama Papers have requested finance minister Edward Scicluna to present himself for an exchange of views with MEPs from both the PANA and the Economic Affairs committees, on 26 January.

“The purpose would be to discuss Presidency priorities as well as the state of play of discussions in Council on current and upcoming legislative proposals such as the proposal for a revision of the fourth anti-money-laundering directive (4AMLD), and the state of play of implementation and enforcement of existing legislation (3AMLD),” committee chairmen Werner Langen and Roberto Gaultieri said.

On 20 February, the PANA committee will send a delegation to Malta to meet with representatives from business, academics, media and NGOs, the Tax Compliance Unit, the Financial Intelligence Analysis Unit, MPs, as well as Edward Scicluna

matthew_vella
Matthew Vella is executive editor at MaltaToday.