Scicluna: Malta in favour of EU COVID package, but cannot be burdened unfairly

Malta must ensure €1 billion coronavirus package from EU does not affect country's competitiveness, Edward Scicluna says

Finance Minister Edward Scicluna
Finance Minister Edward Scicluna

Malta is “in principle” favour of the EU’s COVID-19 rescue package, but it wants to ensure it is not burdened unfairly by the measures to raise rescue funds, such as harmonised taxes, finance minister Edward Scicluna said.

Malta could receive close to €1 billion in funds to help the economy recover from the impact of the pandemic. But Scicluna said Malta had to ensure that it is not burdened unfairly by the measures the EU would put in place to raise money from member states to finance the rescue plan.

Last week, European Commission president Ursula von der Leyen unveiled proposals for a €750 EU recovery package meant to revive the European economy from the negative impact of the coronavirus, with Malta expected to receive almost €1 billion in the form of loans and grants.

While the individual allocations for each member states under the package, dubbed Next Generation EU, have not been finalised, EU sources told this newspaper that Malta could receive €992 million.

Concerns were quickly voiced however, on whether the package could be a double-edged sword for Malta, with Scicluna himself warning of the potential pitfalls of the proposed EU rescue package, which he said would turn out to be a “prickly pear.”

Moreover, EU expert and former PN MEP candidate Peter Agius had told MaltaToday that the EU might increase financial transaction and digital services taxes in member states to fund the package, which could end up being detrimental to these two important sectors in Malta.

Scicluna today said the government did not have an issue with taxes per se, but wanted to make sure the island’s competitivity wasn’t harmed.

He noted that, in the past, various EU taxation proposals had been opposed.

“This is not the first time the European Commission proposed this sort of thing. The Common Consolidated Corporate Tax Base (CCTB), for instance, has a long history of being ditched by certain countries, including Malta,” he said.

“The same is true for the financial transaction tax which was born after the 2008/9 economic crisis. This ended up having only nine to 10 countries to implement it, and an agreement hasn’t even been reached between them...”

The digital tax – which could be used to raise funds for the COVID-19 package – was the latest form of these kinds of taxes, he said, highlighting that the EU was at most likely to put in place a corporation tax, since digital taxes would present considerable hurdles.

“US president Donald Trump said on Tuesday that he would respond and take commercial action, by means of tariffs, against countries which inctroduce a digital tax on large American corporations, such as Google. So, in effect, it’s not easy to put a [digital tax] in place,” Scicluna said.

“The most which [the EU could do] is implement a corporation tax. This might be accepted by the US and OECD. Malta will participate in any discussion on this, like all other member states will. What is important for us is not taxes, but maintaining our competitivity.”

Scicluna also mentioned other taxes the EU could raise to generate funds for the package, including environmental taxes.

“Would Malta be against environment taxes - which aim to reduce emission which are harming us? No. But when a tax - environmental or not - is put in pace, it must be spread [fairly] and its distriubtion should not hurt small states more than the big one. When I say small, I don’t only mean Malta geographical size, but als our income when compared to countries like Germany and France.”

With this in mind, the minister said Malta would be discussing the Commission’s proposals within the relevant EU institutions - the European Parliament and European Council will have to draw up their respective positions on the package, after which it can be decided how much each country will get from the programme.

“After all, there must be unanimous agreement for a tax to be introduced. So we now have to see how discussion will evolve... In principle, we are in favour of the package and we will ensure it is fair for all, including for Malta.”