Gaming authority ‘convinced’ industry will withstand new EU tax laws

Malta Gaming Authority’s executive chairman insisted that the gaming industry will continue to flourish on the island, even if proposed EU legislation to clamp down on tax avoidance goes through.

“The threat [of a common European consolidated corporate tax base] has been building up for a long time now and will come to pass in some form in the future, be it in five years or ten,” Joseph Cuschieri said on Monday night’s edition of Reporter. “Gaming practitioners are already preparing for the future when Malta might lose its fiscal advantage, but our competitiveness in the gaming sector is not only about our fiscal regime.

“If Malta remains innovative and competitive through effective legislation, an effective regulatory body and the provision of necessary specialized services, then I am confident that the sector will withstand such proposed legislation.”

In order to attract foreign companies to set up subsidiaries on the island, Malta offers an incredibly advantageous refund on shareholder dividends – profits that they would have otherwise made in other EU countries.

While the statutory corporate tax rate is 35%, shareholders can take advantage of tax rebates after the company’s taxed profits are distributed amongst them. This rebate on dividends reaches as high as six-sevenths of the corporate tax, effectively reducing shareholders’ individual tax burdens to 0-5%.

However, the European Parliament last month voted overwhelmingly in favour of recommendations to tackle tax avoidance – that include the establishment of a common European corporate tax base that would streamline the way companies calculate profits.

The Labour and Nationalist parties have both opposed the proposal and indeed all six Maltese MEPs voted against it last month. KPMG partner Juanita Bencini recently described the proposals as “dark clouds on the horizon” that could threaten the local financial services industry, as well as Malta’s sovereignty over its own fiscal affairs.

However, Cuschieri sounded a far more upbeat tone over the potential tax changes, claiming that the presence of so many international gaming brands on the island will act as a pull factor for other companies to set up shop here.

“Other advantages include the fact that English is an official language here, that the cost of doing business is relatively low, that our regulatory regime is transparent, our economy is growing, our political system stable, and our climate warm.”

He warned though that Malta must “refine” the way it is marketed abroad as a gaming destination so as to remain one step ahead of its competitors.

“Malta was the first mover with regards regulating the gaming industry, but other countries have since followed suit and places like the Isle of Man and Gibraltar now share similar tax jurisdictions,” he said. “We must be innovative and come up with fresh ideas on how we can promote Malta as an attractive destination for gaming companies.”

Indeed, he noted that GamingMalta was set up earlier this year to specifically focus on promoting Malta as a gaming destination, a task previously carried out by the MGA.

‘Organised crime has never been this sophisticated’

The Maltese gaming industry was shaken last summer when several companies were accused of money laundering and suspected links to the ‘Ndrangheta mafia. When asked by host Saviour Balzan on the checks and balances put in place by the MGA to ensure that gaming companies are not simply fronts for money laundering, Cuschieri warned that organised crime “has never been this sophisticated”.

“We conduct vigilant due diligence exercises on new companies, but the way organised criminals design commercial set-ups has never been this sophisticated and as a regulator, we must ensure continuous rigorous surveillance.”

Indeed, he said that the MGA is currently investing in fresh technology that would grant it a “more sophisticated system to monitor the online marketplace”.

“However, we must keep things in perspective. I cannot provide a 100% guarantee that the events of last summer won’t repeat themselves, but that was the first such incident in the 13 years since Malta started regulating the gaming industry.”