Malta inflicted billions of euros in losses to other countries over three years due to corporate tax abuse, according to a leading tax reform advocacy group.
Between 2016 and 2018, other countries lost out on a staggering $2.9 billion (around €2.7 billion) because of cross-border corporate tax abuse enabled by Malta, according to a recent analysis by the UK-based Tax Justice Network.
This put Malta in 34th place for damage inflicted on other countries out of the 174 countries for which data was available.
The countries that inflicted the most damage on others were the Netherlands ($96 billion), the UK ($84 billion) and British Overseas Territory the Cayman Islands ($71 billion).
The analysis reveals that the amount of financial damage Malta dealt to other nations increased dramatically from 2016 to 2017, multiplying by more than 20 times from $75 million to $1.7 billion. The following year it reduced to just over $1 billion.
Meanwhile, the country lost out on significantly less funds to the same practice, losing just $46 million (around €42 million) to cross-border corporate tax abuse during the three years.
The analysis said this was equivalent to two per cent of the country’s healthcare spending over the same period.
UK the 'biggest enabler'
The amount of money Malta lost to cross-border abuse increased year-on-year from 2016 to 2018 however, more than doubling over the first two years from $7 million to $15 million in 2017 before rising to $24 million a year later.
“The biggest enabler of other countries’ tax losses was the UK, which, through its network of British tax havens like Cayman Islands and Jersey, cost other countries $255 billion in public money,” the analysis said.
“The biggest loser to multinational corporations’ tax abuse was the US, which lost $266 billion between 2016 and 2018.”
The EU was the biggest regional loser, with member states losing $220 billion (around €205 billion) over the three years.
The findings come ahead of a United Nations vote expected later this month which could lead to the establishment of a UN tax convention.
Such a move would require global tax rules to be decided at a UN level, wrestling control away from the Organisation for Economic Co-operation and Development (OECD), a body which has been heavily criticised by tax reform advocates.
According to the Tax Justice Network, OECD rules prevent governments from publicly disclosing the details of multinationals that have collectively underpaid $868 billion in corporate tax.
“The OECD, a small club of rich countries... has been setting global tax rules for the rest of the world for over 60 years and has come under widespread criticism for its failure to clamp down on losses to tax havens nor to meaningfully include the rest of the world in its decision-making,” the group said.
Malta first applied to join the OECD in 2005. Efforts were stepped up again this year when Foreign Minister Ian Borg met with the organisation’s secretary-general Mathias Cormann at its headquarters in Paris.
In 2021, the Tax Justice Network ranked Malta 21st out of 70 countries in an index of corporate tax havens. It has also identified it as a ‘blocker’ country seeking to obstruct tax reform at a UN level.
According to the same group, countries are on course to collectively lose almost $5 trillion to tax havens over the next 10 years.