Proposals to protect Malta’s corporate tax regime from larger countries’ efforts to introduce a new minimum rate will be presented to global partners this month, Finance Minister Clyde Caruana said yesterday.

He said that in the coming days 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.  

Wealthy democracies have approved an OECD proposal to impose a minimum corporate tax rate of at least 15 per cent earlier this month, hoping to stop a “race to the bottom”, as nations, including Malta, compete to offer the lowest rates.

Ireland, which, like Malta, has attracted foreign investment due to its low tax rate, has this week indicated it is moving towards a deal.

Caruana was reluctant to get into details of Malta's proposal but said he was of the view that minimum thresholds should be agreed upon that would allow Malta to continue offering competitive tax rates to some types of businesses. 

While conceding that the wind was blowing in the direction of tax harmonisation – the introduction of a minimum rate – the devil of the deal would be in the detail, he said. 

“It is not so much a question of being an outlier as it is of agreeing to set thresholds and other standards, that is where the discussions need to focus,” he said.

The devil of the deal would be in the detail

Sources have indicated that the government is set to propose that the 15 per cent minimum tax rate should only apply to corporations that make a huge turnover.

This would allow medium-to-large operations to still qualify for lower tax brackets.

Malta offers international corporations an effective tax rate of five per cent through a series of refunds and related schemes.

This attracts foreign companies to set up shop on the island, generating hefty tax revenues.

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