Malta is drafting proposals to protect its corporate tax regime from larger countries’ efforts to introduce a new minimum rate of 15%, Finance minister Clyde Caruana said on Tuesday.
He said that, by October, the Finance Ministry will be sending a comprehensive proposal to the Organisation of Economic Co-operation and Development (OECD) which is discussing the introduction of a global minimum tax rate.
Caruana was speaking to Times of Malta from the sidelines of a major financial services conference organised by Finance Malta.
Wealthy democracies have approved an OECD proposal to impose a minimum corporate tax rate of at least 15% earlier this month, hoping to stop a "race to the bottom" as nations, including Malta, compete to offer the lowest rates.
Malta offers international corporations an effective tax rate of 5% through a series of refunds and related schemes. This attracts foriegn companies to set up shop on the island, generating hefty tax revenues for the public coffers.
The OECD’s proposal is one of two pillars of reforms that would also allow countries to tax a share of profits of the 100 most profitable companies in the world - such as Google, Facebook and Apple - regardless of where they are based.
Caruana told Monday’s conference that the OECD tax discussion was an “elephant in the room” he wished to address head-on.
“Right now we have a proposal in front of us, endorsed by 130 countries worldwide. I’ve been involved in different discussions for the last eight months.There are countries that need to generate more revenue and so there is a push here,” he said.
Earlier this month Malta was among 130 countries that said they were backing plans for fairer tax rules.
Weighing in on this, Caruana said that had Malta simply objected to the reforms, it would have been left out of the ongoing discussions.
“Countries that do not agree are simply being asked to leave the room. We want to be a part of this discussion, so we are finalising our own proposals and will be passing them on too,” he said.
No denying Malta has been greylisted
Turning to the other elephant in the room, Caruana said there was no denying that Malta had been put on the so-called grey list of untrustworthy financial jurisdictions.
The global Financial Action Task Force last month placed Malta on a list of countries that must sign up to a reform plan to beef up the effectiveness of law enforcement.
“It is true that Malta has been greylisted but this doesn’t mean we should stop looking towards a righter future,” he said.
He said that two years ago Malta had failed a similar review by the Council of Europe’s MoneyVal. The country’s institutions had reacted to this by kickstarting an aggressive reform driv, which ended in the country comfortably passing a follow-up moneyVal test.
Caruana said he was confident that Malta will simillarly convince the FATF that Malta is effective in the fight against money laundering.
Later during the conference, local experts said they had an ambitious plan to get Malta off the white list in as little as 18 months time.