[WATCH] Labour tax pledge will not apply to shareholders

A Labour Party pledge to lower the corporate tax rate to 25% will only apply to profits that remain in the company, with dividends subject to the existing tax structures.

During a press conference on Friday, Finance Minister Clyde Caruana clarified that the 25% tax would only apply to the first €250,000 of profits generated by the company. In practice, shareholders will be subject to the tax rates already paid.

“If those profits are absorbed by the individuals, the current tax rates apply,” he said. 

Caruana gave a sober analysis of the economic impact Malta could face as a result of the conflict between Ukraine and Russia.

On Thursday, Caruana said that the war has already cost Malta €200 million in projected price increases, forecasting that government proposals to keep consumption buoyant will probably have to be replicated in the year.

He explained that these €200 million are the result of price increases in fuel. Apart from the military war in Ukraine, the Western bloc launched an economic war against Russia.

Apart from sanctions against key Russian businesses and individuals, many Western countries are turning to other countries to secure fuel supplies. Caruana said this is pushing oil and gas prices up. 

“Prices increased because these countries are moving towards other supplies. And their actions will impact us. The €200 million reflects these additional costs for oil and gas,” he said.

READ ALSO: Ukraine war will cost Malta €200 million in subsidies and cushion for inflation

Caruana said he would not raise any taxes during the conflict as it would make Malta less competitive in the global market. However, in preparing for the conflict, the country could gain a competitive advantage.

“If we prepare for this impact, our country will be more competitive. […] I can never raise taxes in such a situation, making the country less competitive and further impacting the economy.”

He added that the Labour Party planned out their election proposals with the Ukrainian conflict in mind. “Even the timing of the proposals is being planned in such a way where we can prepare for the economic impact,” he said.