Malta’s low-tax attraction will only last ‘a little while longer’, Metsola warns

EP President Roberta Metsola says Malta must seek alternative attraction to low-tax status and cautions against harm to upright businesses in effort to get off the greylist

Roberta Metsola addressed the annual conference of the Institute for Financial Services Practitioners
Roberta Metsola addressed the annual conference of the Institute for Financial Services Practitioners

Malta’s tax rebate to foreign companies can only serve as an incentive for “a little while longer”, Roberta Metsola has told financial services practitioners.

The European Parliament president said discussions on a global tax rate are ongoing and urged Malta to be involved in “steering and shaping” discussions.

“We need to look further at what makes Malta truly attractive and our tax rebate to foreign companies will be a leg we can stand on only for a little while longer,” she warned in a speech at the annual conference of the Institute of Financial Services Practitioners.

The tax rebate to foreign companies has long served as an attraction to foreign direct investment.  However, Malta has been at the centre of intense pressure within the EU to relinquish its system and agree to harmonised corporate taxes.

Tax is a national competence and Malta, along with other EU countries, has resisted calls for corporate tax harmonisation. But with a global move towards a minimum tax rate on companies, it is only a matter of time before Malta will have to end its reliance on low taxes to attract foreign companies.

Metsola told practitioners that Malta should be taking its seat at the table of global discussions on tax. “The reality is that we need to see how to work within that context rather than outside it.”

She insisted that tax is only one element of attractiveness in a successful financial services sector, adding that “around the world it is not even the main element”.

She also cautioned against reflecting the negative stereotypes of what people expect from a low-tax jurisdiction. “We need to ensure effectiveness and efficiency of our judicial system. We have to fix the system to give confidence to investors that not only will they have recourse to justice, but will be able to do so without having to wait decades,” she added.

Greylisting and vigilance

Metsola said greylisting continued to put pressure on the Maltese economy and forced the country to take “a good hard long look” at how business is conducted.

She said greylisting was about the fight against money laundering. “As the strain on budgets increases, so will the need to clamp down on hidden or undeclared wealth,” she said.

However, Metsola also urged vigilance not to lampoon bona fide businesses with those who abuse. “We must be vigilant not to throw the baby out with the bathwater and go after the legitimate players - which we know are the vast majority - to give the impression of action without targeting the real abuse,” she cautioned.

Golden passport confrontation

Metsola argued against short-term economic solutions such as rampant construction and golden passports. Malta must seek new areas of economic activity but these cannot be based on the short-termism of the past decade, she added.

“It was economic, political and security short-sightedness to create an economic sphere of activity based on selling passports. It is selling the family silver that puts us in direct confrontation with Europe. We can do better. We are better,” she said.

Only yesterday the European Commission warned it would take Malta to the European Court of Justice unless it scrapped the golden passport scheme. Brussels is insisting the scheme with no genuine link to the island goes against EU laws but Malta is arguing citizenship is a national competence over which the EU has no jurisdiction.

Metsola said Malta needed to attract new business in the digital sphere by ensuring robust regulations and good digital infrastructure.

“Our digital infrastructure is not where it should be. Our laws and the protection and support we give to start-ups are insufficient. There are so many opportunities that are ours for the taking in the next decade but we have to have the courage to go for it,” she said.

Children prepared for a reality that does not exist

Metsola emphasised the need for an education system that prepares children for a reality where continuous training is a necessity.

“Our children are being taught to prepare for a reality that no longer exists. My parents had a cycle of study-work-retire, my children will need to study - work - re-train - work - train again - work somewhere different. My fear is that if we do not instil the critical thinking that you need in this world, our country will become more of a follower than a leader,” she said.

However, she expressed hope that Malta could be a leader in a world where the “size of ideas matter more than land mass”.

“My appeal is for us to avoid the cynical and easy way out of using our geography to excuse mediocrity. We can excel and your sector is proof of this. In this world we have inherited, the size of ideas matter more than land mass. That is the true beauty and benefit that Malta’s accession to the European Union in 2004 has allowed. That is our legacy and we should live up to it,” she concluded her short address.

Ewropej Funded by the European Union

This article is part of a content series called Ewropej. This is a multi-newsroom initiative part-funded by the European Parliament to bring the work of the EP closer to the citizens of Malta and keep them informed about matters that affect their daily lives. This article reflects only the author’s view. The European Parliament is not responsible for any use that may be made of the information it contains.

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