Malta blocks EU plans for a digital tax on corporate turnover

A levy on corporate turnover, as proposed by the European Commission and supported by larger EU member states, would be a major shift from existing rules, whereby companies are charged on their profits and pay no tax if they report losses

Finance minister Edward Scicluna is calling for a long-term fair solution
Finance minister Edward Scicluna is calling for a long-term fair solution

Malta has declared itself against plans by the European Commission to tax the digital turnover of large companies, calling instead for fair long-term solutions that do not cause disparity within and outside the European Union.

At the Informal Economy and Finance (Ecofin) Ministers meeting, held in Sofia, Bulgaria, today, Malta joined Luxembourg and other smaller nations in criticising the plans, which were first presented last month and which call for a 3 percent levy on the digital revenues of large multinational corporations such as Google, Facebook and Amazon.

Big web companies are accused by the Commission and some EU states of paying too little tax in Europe, exploiting an outdated system that has allowed them to shift profits to low-tax countries.

Some 200 companies would fall within the scope of the new tax, European officials said, estimating additional annual revenues of about €5 billion at EU level. But the proposed levy on corporate turnover would be a major shift from existing rules, whereby companies are charged on their profits and pay no tax if they report losses.

Finance Minister Edward Scicluna said that the digitisation of the economy poses a number of challenges, not least taxation ones, but insisted on the need to first determine whether those taxation challenges were local or more wide-spread.

He said the issue had to be ring-fenced and questioned the need to go for the quick-fixes that are currently being explored.

“Malta is in favour of long-term permanent solutions which are agreed to by international consensus under the aegis of the OECD,” he said. “This does not necessarily mean that finding them should take a long time. Rather, what Malta is proposing is finding long-term solutions that can be attained expediently without causing unnecessary disruptions and disparities within and outside the EU.”

In the absence of a deal, some states are already moving alone.

Spain, which backs the commission’s plans along with larger EU members such as Italy and France, said yesterday it would introduce its own levy on digital companies.

German Finance Minister Olaf Scholz, who took office last month, avoided taking a clear line on the issue, in what could be seen as a partial shift from Berlin’s initial open support for a turnover tax.

He told a news conference making digital companies pay more taxes was a “moral question” that needed to be addressed. But he refrained from clarifying how to tackle the issue and did not take the floor during the ministerial debate on the matter.

The Organisation for Economic Cooperation and Development (OECD), the body that coordinates tax policies among rich countries worldwide, has said it is ready to speed up work on a blueprint for a global reform – to include the United States, Japan and China – which was already under way and due in 2020.

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