Local banks have pushed back against talk of imposing a windfall tax on them, arguing that their profits are what allows them to keep lending and supporting economic activity. 

In a statement, the Malta Bankers Association said that it would be “short-sighted” to levy a tax on bank profits and said doing so would have “potentially devastating repercussions on the economy and the country’s financial stability”.

Prime Minister Robert Abela on Tuesday dismissed the possibility of introducing such a tax in the near future, saying this was not the time to discuss new taxes. But he did not discard the idea out of hand, saying the proposal was one which could be discussed when the economy was in a better state. 

Malta’s two largest banks, Bank of Valletta and HSBC, both reported significant increases in their profitability in 2019, with BOV ending the year with €89 million profits and HSBC at €45 million. 

In its statement, the MBA noted that banks’ “very existence and continuity to operate” depended on them making and retaining certain levels of profits.

“They are evaluated on the profitability of their business model, their level of capital adequacy and the observance of minimum ratios, amongst various other things,” the MBA said. 

Banks had also paid “hundreds of millions of euros in direct taxes not to mention many tens of millions more in indirect taxes,” the association noted, while thousands of investors who held shares in banks benefited through dividends they received. 

“Talk of imposing special or windfall taxes on the banks as some kind of consequence for their strong past performance would be a dangerous step at a time when the banking system needs all the stability it can have,” the association said. 

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