'The goalposts have changed': Global minimum tax deal in doubt, Caruana says

The push to introduce a global minimum tax rate of 15 per cent could be in trouble, with several EU member states rethinking their positions, Finance Minister Clyde Caruana told finance experts on Thursday.

The OECD’s move to introduce a global minimum tax rate of 15% for large businesses with a global income of over €750 million was first tabled by the European Commission in late 2021.

It had been pushed by several wealthier countries in an effort to stop what they described as “a race to the bottom,” in which countries such as Malta lure investment by offering a lower tax rate.

By the following year, the rules had made their way into a new EU directive which member states were obliged to transpose.

Despite initially opposing the OECD’s proposals, Malta eventually agreed to the deal through gritted teeth, but not before negotiating a derogation which would allow it to delay introducing the new rules by up to six years.

Speaking at a conference organised by Finance Malta on Thursday, Caruana hinted that the global agreement is now in peril, with a growing list of countries reconsidering their positions after Donald Trump pulled the US out of the agreement earlier this year.

A recent meeting of EU finance ministers laid this bare, Caruana said.

“I could barely believe that as many as 10 member states were voicing their concerns,” he said. “Member states urged for revisions now that it is clear that the US will not be part of such an agreement.”

“The goalposts have changed. What was once a global effort is no longer the case,” Caruana argued.

Caruana stopped short of outlining Malta’s position on the matter, adopting a wait-and-see approach instead.

“Whether the effort will be scrapped remains to be seen,” he said.

Rumblings of discontent over the deal have been growing in recent months.

Last week, Politico reported that several of Europe’s smaller countries, including Hungary, Slovakia and the Baltic states, were leading the charge against the rules, in an effort to have them watered down.

Tax regime remains Malta's greatest pull factor

Although Malta’s corporate tax rate stands at 35%, a refund system means certain larger multinationals only pay 5% tax.

Malta’s favourable tax regime remains its main pull factor for foreign investors, with a recent EY survey finding that four out of every five investors point to cheaper tax rates as Malta’s main attraction.

This week, news emerged that UK gambling firm Sky Bet was relocating its headquarters to Malta, potentially saving £55 million in tax each year.

If they come into effect, the rules are expected to affect more than 660 companies that employ some 20,000 people.

This summer, Prime Minister Robert Abela said that 10 foreign-owned companies would start paying their 15% tax in Malta, rather than paying 5% in Malta and the remaining 10% in their countries of origin.