MEPs’ new ‘tax crimes’ committee to focus on Malta’s passport sale and tax regime

MEPs have agreed on a tax avoidance and fraud committee to investigate citizenship and non-dom tax regimes in Malta, Portugal, Italy, the UK and Cyprus

Both Portuguese prime minister Antonio Costa and Malta PM Joseph Muscat (right) preside over citizenship-by-investment regimes
Both Portuguese prime minister Antonio Costa and Malta PM Joseph Muscat (right) preside over citizenship-by-investment regimes

A new investigation into Malta’s taxation regime is about to be launched as MEPs have agreed on a new committee that will deal with tax justice.

The European Parliament in Brussels will investigate for the first time tax privileges for new residents which benefit from citizenship programmes and non-domiciliary regimes in Malta, Portugal, Italy, the United Kingdom and Cyprus.

The EP’s conference of presidents on Thursday adopted the mandate for the new special committee on financial crime, tax fraud and tax avoidance. The committee is expected to take an interest into Malta’s Individual Investor Programme and its tax imputation scheme which can levy an effective tax rate of 5% for foreign companies that book profits in Malta.

This will be the fourth committee of its kind after the TAXE, TAX2, and the PANA committee of inquiry into the Panama Papers that was launched in 2016.

READ MORE Malta's tax regime and benefits

The ‘tax crimes’ committee will not only look into the Paradise Papers of November 2017, but also have a 13-point remit, including tax avoidance by the digital economy and “national schemes providing tax privileges for new residents or foreign income”, VAT fraud, plus member states' own tax breaks within single market.

It will have 45 members and be in place for 12 months.

Green MEP Sven Giegold, who is a vice-president of the PANA committee, said the mandate was negotiated across all the EP’s political groups.

“All relevant proposals from our group have been accepted. The new Special Committee will also review the extent to which the EU Commission and the European Member States have implemented the recommendations of the previous special committees on LuxLeaks (TAXE and TAX2) and the Committee of Inquiry on the Panama Papers (PANA),” the German MEP said.

The Labour Party’s own political grouping, the Socialists and Democrats, said it was crucial in setting up the committee. “The work to crack down on tax dodging must continue,” German MEP Udo Bullman said.

“We also want to focus on effective implementation and monitor the impact of the recommendations the Parliament has put forward. It is also paramount to keep the pressure on EU governments so that we can build a fairer tax system in Europe.”

Approval by the plenary session of the European Parliament on 1 March is only a formality.

“The pressure of the parliament for tax justice in Europe will be intensified. The former special and inquiry committees have contributed successfully to the progress for tax cooperation in Europe during the last years. Unfortunately, the Paradise Papers scandal has not had any new political consequences neither in the EU nor in the Member States,” Giegold said.

“The new tax haven blacklist of the EU lacks credibility and transparency. We will demand full access to all documents on the screening of third countries. We will assess whether some countries or jurisdictions received unjustified special treatment. We also have to follow closely the compilation of the strengthened EU blacklist of non-cooperative money laundering jurisdictions. The mistakes of the tax haven blacklist may not be repeated. It is totally unacceptable that the EU’s blacklists do not include the most important places in the world of shadow finance.”

Giegold also said that the United Kingdom’s eventual departure from the European Union will mean that the committee will also give particular attention to British Crown Dependencies and Overseas Territories that act as tax havens for the City of London.

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