Clyde Caruana hints at changes in taxation system to avoid international pressure

The Finance Minister says Malta must be "astute" and pick its battles when defending the local taxation regime

 

Clyde Caruana addressing the audience at a Business Breakfast event. Photo: James Bianchi (MaltaToday)
Clyde Caruana addressing the audience at a Business Breakfast event. Photo: James Bianchi (MaltaToday)

Malta’s taxation system may have to be tweaked to placate international disquiet, Clyde Caruana has hinted.

The Finance Minister said Malta was doing nothing wrong but had to be “astute” when trying to convince others.

“We need to defend [the taxation system] and convince others but we also have to change where necessary because it will be useless to battle against the tide and stamp our feet... we need to be astute,” Caruana told business operators and stakeholders this morning.

He was delivering the opening speech at a business breakfast organised by the government titled Towards a New Prosperity.

Malta’s taxation system offers significant advantages to foreign companies that shift part of their profits here and has often been the target of large EU member states like Germany and France.

The system had cleared the European Commission’s hurdle when Malta joined the EU but pressure has been growing across the bloc for a common corporate tax system.

Taxation matters do not fall within the remit of the EU and any changes will require unanimous consensus. Malta and other member states have always resisted moves towards a common approach on taxation.

Caruana’s admission echoes that of his predecessor, Edward Scicluna, who also hinted at the need to tweak the taxation system to get the heat off Malta’s back.

Turning to the domestic situation, the Finance Minister said government will not hike up taxes to plug the financial shortfall caused by the COVID-19 pandemic.

“Businesses have already suffered a blow with the pandemic and government will not be giving them a second blow by increasing taxation,” Caruana said, calling however for greater responsibility.

PM speaks with confidence over MoneyVal test

During his address at the same Business Breakfast event, Prime Minister Robert Abela spoke as fact that Malta will pass its MoneyVal test, the results of which are expected to be received by end of January. 

"Whoever thinks that our work on good governance will be over once we pass our MoneyVal test is mistaken - our work goes beyond this," he said. 

"For some, governance is something strict that only interests them because there is pressure from beyond our country to make changes. I believe that governance is the most essential thing for modern economic success."