MBR_ISSUE 38_LowRes

Malta Business Review
TALKING POINT
IS MALTA A TAX HAVEN?
Tax evasion and tax havens have become a subject
of much discussion on a global level. International
revelations such as the Panama Papers and the Paradise
Papers have only served to put the spotlight on the tax
regime of a number of countries. The same revelations
have also served to cast attention on the topic of efficient
tax structures and the way such structures are operated.
Some of the information contained in these revelations
can be said to be interesting and worthy of further
investigations whilst other elements are quite simply
sensationalism at its worst, twisting facts and perhaps
giving space to untruths.
What a lot of misinformation making the
rounds on the internet one question worth
examining is the one on whether Malta can
be classified as a tax haven. Malta’s tax laws
originally date back to 1948 when Malta was
a British colony. Since joining the EU in 2004
Malta has built its tax legislation on models in
the UK, the Netherlands, Spain, Luxembourg
and even Germany.
In an interesting article on The Times Francis
J Vassallo writes that, “Tax havens are
jurisdictions where companies are not subject
to tax and where the information about the
ownership of those companies is usually
kept secret, either through bearer shares or
because the information is not disclosed in
the jurisdiction’s public registry”.
Indeed Maltese companies are registered
with the Registry of Companies which in turn
is a register available for public viewing online.
Thus it would be factually incorrect to state
that Malta is a tax haven since any individual
intent on creating structures meant to hide
ownership would choose other jurisdictions
which cater for such an intent.
Malta has over 70 double taxation treaties,
including with some of the most important
OECD member states, including the US.
Malta also adheres to the Common Reporting
Standard established by the OECD.
Salient features of Malta’s tax regime such
as the Participation Exemption where
introduced into Maltese law following a
full consultation with the EU and after the
approval of the Council of Finance Ministers.
The Exemption System on the other hand is
practically identical to that found in Holland,
Spain and Luxembourg.
The EU PANA Committee published Report
2017/2013(INI), which presents the
Committee’s findings on the investigation
into Malta's tax scheme and political sphere.
Some of the results illustrate an opposite
view to the “Maltese tax haven” opinion
held by many scholars and politicians. The
Committee found that the Maltese tax system
is “very attractive and in line with current
international and EU standards as regards
harmful tax competition.” However, as the
Finance Minister has admitted, the attractive
scheme can be prone to abuse. In addition,
Malta has transposed EU rules and respects
OECD standards in terms of transparency, the
fight against tax fraud and money laundering.
On the other hand, the institutions in charge
of implementing and enforcing rules as
regards tax fraud and money laundering are
highly politicized. The tax compliance unit
mentioned a lack of resources to comply with
the spontaneous exchange of information
required by the EU Directive on Administrative
Cooperation. Meanwhile, Malta failed to
respond to the questionnaire sent by the
Committee, which asked for opinions from
Finance and Justice Ministers in 25 EU
states. This leads the country to be regarded
as "particularly uncooperative". Malta also
disagreed with Commission proposals on
specific tax issues (e.g. public CBCR, CCCTB).
Malta's economic success has been
overshadowed by corruption scandals that go
to the core of the Labour government elected
in 2013. The government has been under
siege since the Panama Papers revealed
details of secret companies in Panama. Those
revelations have cast doubt on its ability
to push through anti-money laundering
legislation. The so-called Individual Investor
Programme scheme, which enabled Malta
to raise millions by selling its passports to
rich foreigners, is at the centre of an inquiry,
after Mr Busuttil claimed he had evidence to
prove the prime minister's chief of staff was
receiving kickbacks off the scheme.
Malta is thus not only not a tax haven but
indeed it is a European Union member
which has managed to adopt a tax-efficient
framework whilst at the same time respecting
all the obligations which a modern European
democracy should respect.
On the other hand in a black list issued in
December 2017 the Council of Finance
Ministers of the European Union classified
American Samoa, Bahrain, Barbados,
Grenada, Guam, South Korea, Macau,
Marshall Islands, Mongolia, Namibia, Palau,
Panama, Saint Lucia, Samoa, Trinidad and
Tobago, Tunisia and United Arab Emirates
within a tax haven blacklist. MBR
Credit: Warchest
EDITOR’S
Note
War Chest is comprised of War Chest Fiduciary
Services Limited, licensed by the MFSA to act
as Administrator of Private Foundations and War
Chest Corporate Services Limited, licensed by
the MFSA to provide Corporate Services.
8