Economy minister denies Brexit will harm Malta’s tax harmonisation stance

Opposition MP Claudio Grech warns UK’s corporate taxation cut could stiffen competition for Malta, urges itself to position itself as a ‘magnet for foreign talent’

The UK’s departure from the EU will not dent Malta’s unequivocal position against tax harmonisation, economy minister Chris Cardona insisted.

He was responding to a statement by European Studies professor Roderick Pace, who had argued that the UK was one of the strongest EU opponents to tax harmonisation and that its absence will weaken Malta’s position.

However, Cardona retorted that the UK was no friend of Malta’s corporate taxation system.

“Recent debates on tax harmonization showed that the UK wasn’t in favour of granting Malta leverage on its taxation system,” he said. “On the contrary, it had spoken out against Malta’s defence of its system.”

He was speaking on Monday night’s edition of Reporter, that debated the aftermath of the Brexit referendum, in which the United Kingdom narrowly voted in favour of leaving the EU.

“I was honestly surprised at the outcome of the referendum, but their decision was a sovereign one and it shouldn’t be up to us to discuss the merits of their decision,” Cardona, who was recently elected Labour deputy leader for party affairs, said. “However, the government was fully prepared for such an eventuality and had carried out internal studies on the impact of a Brexit on various sectors in the weeks prior to the referendum. As soon as the vote was confirmed, Cabinet met up with stakeholders including the Central Bank governor and the Malta Financial Services Authority chairman and their plans were fully in place.”

Shadow economy minister Claudio Grech poured cold water over concerns that the Brexit vote could lead to an economic catastrophe.

Citing UK chancellor George Osborne’s announcement that he will slash corporation tax to less than 15% in an attempt to woo business to the country, Grech told host Saviour Balzan that the UK will not allow itself to remain at a standstill while its economy suffers.

“They have capable people who managed to build a service-based economy and they are effectively a new competitor now,” he said. “After the initial shock, I’m sure that things will even themselves out. We must now adapt ourselves to this new scenario by consolidating our financial services sector and safeguarding our competitiveness.”

Grech expressed doubt in Malta’s ability target UK companies to relocate to the island, instead suggesting that the country compete with the UK to attract new foreign talent.

“Malta’s economic growth is based on immigration to the country and we must position ourselves as a magnet for talent,” he said. “The arguments against immigration [by the UK’s Leave campaign] were populist ones and people didn’t view the phenomenon of immigration in its totality. Immigrants boost the economy and contribute a lot of money in taxes that a country can then use to invest in healthcare and education and to balance the budget.”

Both Cardona and Grech agreed that the EU shouldn’t attempt a show of force when negotiating with the UK, and the economy minister criticised the union’s initial reaction to Brexit.

“The EU’s kneejerk reaction was an arrogant one, stimulated by the fear that the Brexit vote could have a domino effect on other EU member states,” he said. “The current mood in Brussels is a sad and anxious one, but we must let some time pass to allow the dust to settle.

“Malta’s position from the start was that the EU shouldn’t try and force the UK to rush into triggering Article 50 of the Lisbon Treaty [that would commence a two-year negotiating period for the UK to exit the EU,” he said. “Indeed, other European leaders such as [Italian prime minister] Matteo Renzi changed their stances after listening to Joseph Muscat’s argument.”

Grech said that a show of force will go against the EU’s own interests, arguing that the union should still consider the UK as a crucial partner.

“I disagree with the populist tactic of stamping one’s feet,” he said, while urging Labour and PN to reach political consensus on Malta’s reaction to Brexit.

‘Politicians must now focus on benefits of EU membership’ – Friggieri

Philosophy professor and poet Joe Friggieri urged politicians to learn from the Brexit vote and educate the public on the benefits of EU membership.

“It’s up to politicians now to tell the public what it truly means to be an EU member state; perhaps that’s the most important lesson we should learn from the referendum,” he said. “The idea that immigration was harming the UK’s sovereignty played a major role in the referendum; I don’t think the argument is justifiable and indeed immigrants helped the UK’s economy grow, but people are swayed to vote according to their perception.”

He cited a recent Eurobarometer survey, in which the majority of respondents answered positively to the statement “what brings the citizens of EU member states together is more important than what separates them”, but then argued that the EU was not taking enough action on various sectors.

“The EU hasn’t yet given immigration the importance it merits and has not yet found a solution based on burden sharing. The perception out there is of an influx that cannot be controlled,” he warned.