Malta revenues risk being cut by half under EU single tax proposal, MEP warns

Malta’s tax base will be halved with a new EU proposal on tax harmonisation agree upon by the Economic and Monetary Committee of the European Parliament (ECON) and which will be voted on by the European Parliament at the March plenary session.

A report by NGO Tax Justice Network states that Malta could lose more than half its corporate tax base if the European Commission adopts the proposed tax measures.

The planned “Common Consolidated Corporate Tax Base” (CCCTB) was approved by 38 votes to 11 votes, with five abstentions. A separate, complementary measure which creates the basis for the harmonised corporate tax system – the Common Corporate Tax Base – was approved by 39 votes to 12, with five abstentions.

Labour MEP Alfred Sant told the S&D Group, which backed these proposals, that while agreeing with measures to enhance tax transparency and define digital presence in the EU, he strongly disagreed with the principle of a common EU taxation system.

“A common EU taxation system undermines the sovereignty of national EU governments in the decision and implementation of taxation policies in their respective countries. For this reason I am voting against the two CCCTB reports,” Sant said.

Sant said this was not in Malta’s interests and voted against both reports. “Other MEPs from small EU member states, including Cyprus and Ireland, also voted against. Nothwithstanding this, both reports were approved with a comfortable majority,” Sant said.

The TJN report reveals that a “diverse group of small EU countries, including the Czech Republic, Portugal and Sweden might expect their corporate tax bases to shrink by around one third, with the tax base of Malta, Slovenia and Estonia declining more than half in terms of their loss-consolidated tax base due to formulary apportionment in the CCCTB scenario.”

ECON approved reports on the CCTV and CCCTB, which aim to create a single EU corporate tax regime across all EU member states.

The General Affairs Council of the EU convened in Brussels on Tuesday to prepare the agenda for the March European Council of European leaders, where EU affairs minister Helena Dallii warned that Europe cannot act unilaterally on corporate taxation.