Encouraging the avoidance of paying tax

The issue as to whether or not  Malta is a tax haven has been brought to the fore once again, as a result of the amendment to the Panama Papers Inquiry Report discussed in the European Parliament earlier this week. The defeated amendment would have seen Malta, Luxembourg, Ireland and the Netherlands labelled by the European Parliament as “tax havens”.

The matter is much more complex. On the one hand it involves tax competition and on the other hand it is a matter of justice in taxation matters.

As has been repeatedly stated, competition on taxation matters is one of the few areas in which small, as well as peripheral, countries in the European Union have a competitive advantage. Alternattiva Demokratika-The Green Party is not in favour of loosing this competitive advantage through tax harmonisation in the EU. However, it has to be used in a responsible manner.

The rules permitting the refund of a substantial amount of tax paid by foreign-owned companies based in Malta is one of the main reasons for the current spotlight. This substantial tax refund effectively reduces the tax paid by such companies from 35% to five per cent and is obviously considered very attractive by a number of companies. The basic question that requires a clear answer is how many of these companies are letter-box companies, that is companies which do not have any part of their operations on Maltese soil?

It would be reasonable to encourage companies to base part of their operations in Malta and, as a result, make use of tax advantages. But in respect of those companies which have not moved any part of their operations to Malta, making use of beneficial taxation arrangements is unreasonable and unjust. It leads to such companies avoiding paying tax in the countries in which they create their profits and consequently avoiding their social responsibilities on paying taxes in the countries that are providing them with the very facilities which make it possible for them to create their wealth.

In a nutshell, Malta is providing these companies with the legal framework to avoid their taxation responsibilities in the countries in which they operate through payment of a fraction of these taxes to the Maltese Exchequer. They pocket the rest.

Hiding behind the EU unanimity rule on tax issues will not get us anywhere, as Ireland has learnt in the Apple case. At the end of the day, the situation is not just about  taxation: it also involves competition rules and rules regulating state aid, as the legal infrastructure encouraging the avoidance of taxation is, in effect, a mechanism for state aid. The is also an issue of tax justice, as a result of which tax should be paid where the profits are generated.

Tax competition has a role to play as an important tool that small and peripheral countries in the EU have at their disposal. No one should expect these countries, Malta included, to throw away the small advantage they have, but it should be clear that this should be used responsibly and in no way should it buttress the urge of multinationals to circumvent the national taxation system in the country where their profits are generated.

Profits should be taxed where they are actually generated and not elsewhere. The EU needs to end – once and for all – not only tax evasion but also tax avoidance resulting from loopholes in national taxation rules. For this to happen, the EU member states must not only be vigilant, but they must also refrain from encouraging tax avoidance through the creation of more loopholes.

Tackling tax evasion and tax avoidance seriously will mean that taxes are paid where they are due, thereby funding the services and infrastructure that is required in a modern, civilised society. This can only happen if more companies pay their dues.

Tax competition need not be a race to the bottom.

published in The Malta Independent on Sunday : 17 December 2017


Tax avoidance: does Malta play a role?


On 30 August, the European Union, through Competition Commissioner Margrethe Vestager, ordered Apple Corporation to pay €13 billion in unpaid taxes to the Irish state.  The EU ruling considered that the special tax treatment of Apple, whose tax bill was substantially reduced, amounted to unlawful state aid.

In November 2014, through Luxleaks, we learnt of tax avoidance schemes in Luxembourg and elsewhere, as a result of which billions of euros in tax were being avoided by multinational corporations.

The EU has subsequently launched various investigations into the favourable tax treatment which Luxembourg, The Netherlands and Belgium have granted to various multinationals.

As a contribution to the on-going debate on tax avoidance in the EU, the Green Group in the European Parliament has recently published a study on the tax avoidance strategies adopted by the industrial giant BASF, the largest chemical company in the world.

Founded in 1865, BASF has its headquarters in Ludwigshafen, Germany, from where it manages a €70.4 billion turnover with production sites in 80 countries.

Malta features in this report together with Belgium, the Netherlands and Switzerland.

Over the years, BASF has used mismatches in national tax systems in order to avoid paying its taxes. It is estimated that, over a five-year period spanning 2010 to 2014, BASF avoided the payment of close to one billion euros in taxes.

Chapter VIII of the report, published by the Green Group in the European Parliament, deals with Malta. It refers to the existence of a BASF subsidiary in Malta which held €5.07 billion in assets. These assets where transferred to a new German subsidiary, BASF Finance Malta GMBH, which was managed from an office in St Julian’s, thereby creating the eligibility for preferential tax treatment which could amount to as much as a refund of six-sevenths of all tax payable in Malta.

All this is a clearly planned movement of profits through generous loopholes as a way of avoiding most of, if not all, of the taxation which would be due under normal circumstances.

This abuse of the differences in national tax systems needs to be addressed urgently. As rightly stated by Malta’s Finance Minister Edward Scicluna at a Luxembourg ECOFIN meeting last September, the way forward lies in coordination at an EU level and not in the harmonisation of the national taxation systems, as some EU member states are insisting.

Tax competition has a role to play as an important tool that small and peripheral countries in the EU have at their disposal. No one should expect these countries to throw away the small advantage they have, but it should be clear that this should be used responsibly and in no way should it buttress the urge of multinationals to circumvent the national taxation system where their profits are generated.

Profits should be taxed where they are actually generated and not elsewhere. The EU needs to end – once and for all – not only tax evasion but also tax avoidance resulting from loopholes in national tax rules. For this to happen, the member states must not only be vigilant, but must also refrain from encouraging tax avoidance through the creation of more loopholes.

Tackling tax evasion and tax avoidance seriously will mean that taxes are paid where they are due, thereby funding the services and infrastructure that is required in a modern, civilised society. This can only happen if more companies pay their dues. Tax competition need not be a race to the bottom.

published in The Malta Independent on Sunday – 4 December 2016

Nature provides solution

circular economy



The economy is a linear one. We extract the earth’s resources, make use of them and, subsequently, when they are beyond their useful life, we throw them away.

Clearly, the linear economy and its exponents assume that this pattern of behaviour can go on and on. However, in distinct contrast to this philosophy, the earth’s resources are limited and not infinite and consequently, a linear economy is unsustainable.

In contrast to the linear economy, the politics of sustainable development puts forward the circular economy alternative. This signifies that a product , instead of being thrown away and ending in its “grave” at the end of its useful life, gives birth to another product. This is the cradle-to-cradle philosophy, which Mother Earth has been using successfully for ages.

Nature in fact works in this manner. Take a look at any tree. At the appropriate time, it sheds its leaves, which disintegrate in the soil below. Nature does not waste the leaves shed by the tree, as they are reused and reabsorbed through the roots of the same tree as nutrients.

The circular economy is, hence, basically an imitation of nature. In environmental-speak we call this biomimicry.

Through the office of DG Environment, the European Commission, in August 2014, published a scoping study “to identify potential circular economy actions, priority sectors, material flows & value chains”.

The circular economy deals with much more than waste prevention and waste reduction. Eco-design is one particular area of action. Through eco-design the circular economy seeks to eliminate waste at the drawing board. When product ideas are still in the conceptual stage, eco-design is the tool through which such products can be planned in such a manner that they create less and less waste. This is done through subjecting the constitutive elements of the product being designed to a lifecycle assessment: that is from extraction up to end of life.

This assessment leads to the identification of all the environmental impacts of a product. Consequently the options that result in the least environmental impacts can be selected. In addition, a lifecycle assessment will also point to the best materials to be used, such that, at the end of its useful life, a product could be easily recycled.


In their book Cradle to Cradle: Remaking the way we make things William McDonough and Michael Braungart focus specifically on this aspect. They identify specific industrial and commercial initiatives which seek to dematerialise the economy as a result of which we end up doing more with less. The same level of service is achieved but, in the process, has substantially fewer material inputs: practical resource efficiency.

In addition to saving on material costs as well as energy, the transition from a linear to a circular economy presents numerous potential benefits. In particular, it attracts additional investment and can create thousands of jobs that realistically contribute to making the world a better place to live in.

Since last May and ending next month, the European Commission is carrying out a public consultation to be in a position to present a circular economy strategy that would be more ambitious than the that put forward by the Barroso Commission.

In the EU Roadmap for a Circular Economy strategy, the clear focus is on innovation and job creation placed within the wider EU commitment to sustainable development. The EU wants to decouple the strategy from waste management and, as a result, to factor in other policies such as competitiveness, research and innovation, environment protection, job creation and economic growth as the practical objectives of a revised circular economy strategy.

Addressing the 2015 European Circular Economy Conference last March, European Environment Commissioner Karmenu Vella emphasised that, in a circular economy, sustainability is inbuilt into the fabric of society.

I will go one further : the circular economy, if allowed to operate, will decrease the incompatibilities between the economy and nature. It will bring us closer to reality: that we live in an ecosystem which must be respected at all times and at all costs.

published in the Times of Malta : Thursday 13 July 2015

Malta, il-Lussimburgu u l-evażjoni tat-taxxa

Juncker + Muscat

Matul il-ġranet li għaddew segwejna l-informazzjoni żvelata dwar il-Lussimburgu. Kif l-awtoritajiet tat-taxxa tal-pajjiż, fiż-żmien li Jean Claude Juncker kien Prim Ministru innegozjaw ma numru ta’ kumpaniji kbar status fiskali li permezz tiegħu setgħu “jiffrankaw” biljuni kbar f’taxxi.

Din li jiffrankaw fil-fatt ma hi xejn għajr evazjoni legalizzata tat-taxxa. Biex ma jħallsux taxxa f’pajjiż jagħmlu użu mil-liġijiet ta’ pajjiż ieħor. Għal min hu fil-business dan hu aċċettabbli. Fil-fatt meta kien ippressat mill-istampa Jean Claude Juncker qal li dak li ġara kien legali imma jifhem li mhux aċċettabbli etikament.

Għax il-politika m’għandiex x’taqsam biss mal-liġi. Dak li hu legali mhux dejjem huwa aċċettabbli. Fil-prattika, l-Lussimburgu taħt it-tmexxija ta’ Juncker għamlitha possibli lil numru ta’ multinazzjonali jħallsu ħafna inqas f’taxxi.  Dan hu etikament ħażin. Għax ċaħħdet lill-pajjiżi fejn joperaw dawn il-kumpaniji minn taxxi li kienu meħtieġa għal programmi soċjali f’dawk il-pajjiżi.

L-argumenti politiċi li jinġiebu s’issa huma dawk dwar il-kompetizzjoni fiskali. Jiġifieri li ġaladarba t-tassazzjoni hi kompetenza tal-istati membri fl-Unjoni Ewropeja, x’rati ta’ taxxa jitħallsu u minn min hu determinabbli biss individwalment mill-istati membri tal-Unjoni Ewropeja.

Imma issa hemm min qed jargumenta li meta pajjiż jagħti status fiskali privileġġjat lil dawn il-kumpaniji biex jiġbdhom lejn il-pajjiż, idaħħal ftit taxxi minn fuqhom kif ukoll joħloq numru ta’ impiegi konnessi mar-reġistrazzjoni u l-amministrazzjoni tal-kumpaniji, dan kollu hu għajnuna mill-istat (state aid) liema għajnuna mhiex aċċettabbli.

Għalhekk fetħet investigazzjoni dwar il-Lussimburgu li qed titmexxa mill-Kummissarju għall-Kompetizzjoni, id-Daniża Margrethe Vestager.

Hu inevitabbli li dan kollu f’xi stadju ser iħalli impatt fuq is-settur finanzjarju f’Malta. Huwa magħruf li bosta xogħol f’dan il-qasam ġie f’Malta minħabba pakkett ta’ inċentivi li jinkludi rati ta’ taxxa favorevoli ħafna. Fi ftit kliem dawn il-kumpaniji ġew hawn għax jaqblilhom. Jaqblilhom għax iħallsu ftit taxxi ħdejn li jkollhom iħallsu f’pajjiżi oħra. Bħala riżultat ta’ dan qed jagħtu kontribut lill-ekonomija tal-pajjiż kif ukoll qed jiġġeneraw numru mhux żgħir ta’ impiegi.

Il-problema hi li dan kollu huwa ibbażat fuq l-evażjoni tat-taxxa f’pajjiżi  oħra. Hi problema li rridu niffaċċjaw fix-xhur li ġejjin meta l-Kummissjoni Ewropeja tiddeċiedi jekk tiftaħx investigazzjoni dwar Malta kif ukoll dwar pajjiżi oħra fosthom l-Irlanda u dan wara li tiżviluppa ftit ieħor l-investigazzjoni dwar il-Lussimburgu.

Tajjeb li l-istat Malti jiġġieled f’Malta kontra l-evażjoni tat-taxxa. Imma imbagħad hi ipokrezija politika li Malta tfittex li tibbenefika mill-evażjoni tat-taxxa f’pajjiżi oħra.  Jew aħna kontra l-evażjoni jew m’aħniex!  Ma nistgħux inkunu kredibbli bħala pajjiż jekk nibqgħu niżviluppaw l-ekonomija tagħna fuq l-evażjoni tat-taxxi f’pajjiżi oħra.  L-ekonomija u l-etika għandhom jimxu id f’id.

L-irħula madwar l-ajruport ta’ Malta


Il-Malta Today illum irrappurtat dwar l-iżvilupp propost fl-Airport Internazzjonali ta’ Malta.

Hemm applikazzjoni pendenti għal Masterplan li tinkludi diversi binjiet.

L-impatti ikkawżati minn dan l-iżvilupp ser ikun sostanzjali fuq il-komunitajiet madwar l-Airport u ċjoe fuq l-irħula ta’ Ħal-Luqa, l-Gudja, Ħal Kirkop u Ħal-Safi.

L-iżvilupp propost ser jiġġenera ħafna iktar traffiku fid-direzzjoni tal-ajruport u per konsegwenza iktar tniġġiż tal-arja.

L-airport ta’ Malta hu airport ta’ pajjiż żgħir, daqs wieħed reġjonali fil-kontinent Ewropew,  u ma jagħmilx sens li jkun fih facilitajiet bħall-ajruporti l-kbar tad-dinja. Il-facilitajiet provduti għandhom ikunu kompatibbli mad-daqs żgħir tal-pajjiż. Għandhom ukoll jieħdu in konsiderazzjoni li tefa ta’ ġebla l-bogħod hemm erbat irħula li fihom hemm diversi negożji żgħar. Kif ser jiġu effettwati dawn in-negozji żgħar? Din mhix biss materja ta’ kompetittivita’, imma fuq kollox hi materja ta’ infrastruttura ekonomika u soċjali fl-irħula tagħna li bi proġetti bħal dawn ser titmermer b’rata aċċellerata.

Fil-ġranet li ġejjin jagħlaq iż-żmien ta’ konsultazzjoni pubblika dwar ir-rapport li jikkonsidra l-impatt ambjentali. Imbagħad ikollna ċans li niddiskutu dan il-proġett f’iktar dettall.

L-ibliet u l-irħula tagħna għandhom bżonn inkoraġġiment biex isaħħu l-infrastruttura ekonomika u soċjali. L-iżvilupp veru ma jkissirhomx iżda jagħihom is-saħħa.


Towards a Circular Economy

circular economy

In a recent interview EU Environment Commissioner Januz Potočnik stated that the European Union is en route to the circular economy. A step which he described as being essential in ensuring the EU’s competitiveness.

The circular economy, in contrast to the linear economy is one which respects nature and seeks to utilise the earth’s resources in a sustainable manner.

The linear economy is based on a take-make-waste model, extracting raw materials from the earth and dumping the resulting waste after use.  This is a cradle to grave path for raw materials. The EU’s waste management strategy in conjunction with its Roadmap to a Resources Efficient Europe seeks to decouple the generation of waste from economic growth thus nudging the EU towards a new path: one of green growth.

This is also the basic philosophy of the Waste Management Strategy proposed by the Environment Ministry in Malta and currently subject to public consultation.

Malta’s proposed Waste Management Strategy advocates a policy of waste minimisation, that is, we must make an effort to avoid use of resources whenever possible. In addition it then advocates recycling the waste which is generated. This is done by tackling different waste streams in a manner most appropriate to the materials used in that specific stream. 2050 is the Malta target for achieving a Zero Waste society. An achievable target only if we get down to business immediately.

Waste separation is  an essential prerequisite in order to ensure that effective recycling takes place.   As a result of recycling, the waste from a specific product or process feeds a separate process. This is the manner in which nature functions. Have you ever noted how a tree sheds its leaves? How these leaves slowly decompose and nourish the soil, micro-organisms, insects and plants and actually feed the surrounding eco-system?

We have a lot to learn from nature. Biomimicry, imitating nature, is in fact a branch of study which seeks to apply nature’s lessons to solve many modern day problems. Discarding our throwaway attitudes is one such basic lesson.

Modern manufacturing is characterised by a cradle to grave design. It is the result of a society accustomed to throw away products once their useful life ends.

Applying nature’s lessons hence signifies manufacturing products whose life cycle is no longer one which leads from the cradle (production) to their grave (disposal). Instead of being discarded at the end of its useful life a product gives birth to something else through recycling. Just like nature does when dealing with the tree’s leaves. The cradle to grave cycle needs to be transformed into a cradle to cradle cycle.

This obviously has an impact on the manner in which products are designed.  In their  book  Cradle to Cradle, remaking the way we make things, American Architect William McDonough and German Chemist Michael Braungart explain that life cycle thinking, instead of filtering out the undesirable substances and toxins in a product at the end of the manufacturing process filter them out at the beginning, that is on the drawing board.

A waste management strategy which is based on a resource management approach is linked to these long term aims. It is a long process but one which is finally rewarding.

By separating our waste we facilitate its recycling. When recycling takes place we reduce the take-up of the earth’s resources and consequently avoid using the energy required to extract more resources from the earth.

All this shifts the focus from economic growth linked to activities which harm our surroundings to economic activity which enhances them. This leads to the creation of  green jobs.  It shifts our thinking to one which links prosperity with environment protection.

Resource efficiency is at the core of Europe’s 2020 strategy. It does not only mean doing more with less, that is, being eco-efficient. It requires also being eco-effective, that is ensuring that the consideration of long term impacts features in all our decisions. That means designing the present with the future in mind.

A waste management policy based on resource efficiency is an essential tool in this respect. This is just one example. Plenty of other examples can be found in appropriate policies to manage our water resources, our land use, our heritage.

All this leads back to the circular economy which is not just a green way of organising our economy.  It is a different way of life. A way of life which is not antagonistic to our surroundings but one which is in harmony with them.

This is what sustainable development is all about. It seeks to redimension the manner we think.. Having just one Earth we must realise that we cannot have another try if we succeed in ruining the present one.  There is no Plan B.

The circular economy is an adequate tool which can set us back on track.

published in The Times, Saturday November 2, 2013