Malta’s ‘attractiveness’ driven by corporate tax rules, survey finds

Malta to have Artificial Intelligence regulatory framework in a ‘few months’, Joseph Muscat announces

Joseph Muscat said Malta will be launching new rules to regulate AI
Joseph Muscat said Malta will be launching new rules to regulate AI

Malta will be passing new laws to regulate Artificial Intelligence, after having enacted a complete blockchain framework this year, Prime Minister Joseph Muscat said on Wednesday. 

Speaking at the EY Annual Attractiveness Event, Muscat said Malta was currently consulting “world leaders to have a regulatory framework for AI in place in the next few months”. 

He said Malta would not fear change and continue to embrace emerging digital technologies, as it was doing with digital ledger technologies like blockchain. “We did not go to the industry and offer a free-for-all market,” Muscat said. “We did not offer any tax incentives, just sensible regulations.” 

This year’s EY Attractiveness survey was held among 150 companies with a combined turnover of over €2.5 billion. 

In general, 74% of investors said they believed Malta to be an attractive destination for Foreign Direct Investment (FDI). Interestingly however, only 48% said they believed Malta would still be attractive in three years in 2021, with 47% saying they weren’t sure. 

Malta’s attractiveness was mainly driven by corporate taxation considerations (88% of respondents), the stability of Mala’s social climate (75%) and the potential for productivity increase for their company (67%). 

Though relatively high, Malta’s attractiveness is at its lowest point in recent years. 

On the other hand, the areas investors felt Malta needed to improve most in where in the stability and transparency of its political, legal and regulatory environment (44%); its R&D and innovation environment (37%); and transport and logistics infrastructure (26%). 

The survey found most investors (83%) believe that Malta was keeping pace with regulatory changes in competing jurisdictions, up 19% since last year. 

One of the biggest challenges faced by investors in Malta was the ability to source skilled labour. In fact, 64% of respondents said they were finding it difficult to recruit the required personnel. 

GDP growth through population inflation 

Opposition leader Adrian Delia insisted that Malta’s GDP was being increased through an increase in population. He pointed to figures showing an increase of 15,000 foreign workers to Malta’s labour force. Immigration, he said, was masking a not-so-spectacular in per capita GDP. 

Delia insisted that while some sectors benefitted from increases in the population, this was not true of all industries. He went on to question whether Malta’s carrying capacity, and the number of foreign workers its infrastructure can take, had been determined. 

“Such a plan is necessary for economic operators to work and invest in framework that gives them stability in the longer term,” Delia said, adding that there was no publicly-discussed plan for Malta’s medium and long-term.  

Malta’s current economic model of growth to population inflation, would not last more than five to ten years, he said. 

Immigration, Delia continued, should not be an emotive subject but one about numbers, pointing out that not all immigrants could be classified in the same manner, and that while some could transfer skills to the local workforce, others were simply short-term economic migrants. 

He also stressed that Malta needed to rein in its public service employment especially within the context of it being used to buy votes. “If we’re not honest without ourselves we can’t be honest with otherwise.” 

He called for increased capital expenditure as well as a concerted effort to tackle problems with transport and education. 

Delia also said Malta was also managing its reputation poorly, and that after having built a strong reputation, it now risked losing it because of shady governance. Corruption, he said, was essential for the country’s people and businesses. “Being open for business means we must have a level playing field.” 

Turning to Malta’s taxation tax system, Delia expressed opposition to EU tax harmonisation. The Opposition’s vision, he said, was to build and quality economy that gives good return to those who invest in it and a country that used land and energy responsibly.  “People don’t only want to come and work here, they want to live here.” 


Muscat responds to Delia’s migration argument 

Speaking after Delia, Muscat said there could be no economic growth without foreign workers. 

He noted that a significant portion of respondents had pointed to a lack of talent as being a major consideration. Malta, he said, needed to be as open as possible, insisting that the idea of more economic growth was incompatible with the idea that Malta should limit the number of foreign workers it welcomes. 

The Prime Minister pointed out that the in the last 21 quarters, Malta had always registered growth that was at least twice the European average. “At times, it was ten times that observed in mainland Europe.” 

Similarly, he said Malta had among the best rates of employment, with its economy going from an excessive deficit procedure to yet another surplus. “In one legislature we wiped out the debt that had been accumulated during the previous three.” 

Maltese households had more money invested with local banks while business profits had also increased substantially since 2013. 

“All of this did not happen by mere coincidence, but it was the result of a willingness to act and take decisions,” Muscat said.    

Malta was able to reduce electricity tariffs, lower income tax and implement other similar reforms despite the scepticism of public servants both locally and in Europe.