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

L-iskema taċ-Ċittadinanza ta’ Joseph Muscat: il-kobba tkompli titħabbel

Il-kobba tal-iskema tal-bejgħ taċ-ċittadinanza qed tkompli titħabbel.

Il-Gvern iddeċieda. Ikkonsulta ruħu, prinċipalment wara li kien ġja ħa d-deċiżjonijiet.

Il-ħsieb li għandu l-Gvern hu wieħed ċar ħafna. Għandu bżonn il-flus biex jiffinanzja il-programm politiku tiegħu. Wara li rabat idejh li ma jżidx taxxi, kif ukoll wara li daħal fi sqaq billi naqqas it-taxxa tad-dħul meta l-pajjiż ma kienx ippreparat għal dan, ma kienx baqa’ wisq fejn idur. Iddeċieda li s-sors tal-finanzjament meħtieġ ser ikun id-dħul mill-bejgħ ta’ madwar 1,800 passaport. Dħul li hu ikkalkulat li jammonta għal madwar €1.20 biljun.

L-argumenti politiċi f’Malta instemgħu għal darba, tnejn u iktar. Kulħadd qal tiegħu, iżda l-Gvern wara li bidel xi dettalji tal-iskema, jidhirlu li għandu jibqa’ għaddej.

Mhux ċar jekk dan il-ħsieb dwar il-bejgħ taċ-ċittadinanza żviluppax mill-elezzjoni lil hawn jew inkella jekk ġiex ikkristalllizzat qabel l-elezzjoni ġenerali. Saru kitbiet diġa f’dan is-sens u hemm min spekula li l-pjan sar qabel l-elezzjoni, iżda nżamm mistur. Qed tiċċirkula l-ideja li l-Partit Laburista (u per konsegwenza l-Gvern iffurmat minnu) qiesu obbligat li jimplimenta din l-iskema. Qiesu jrid jonora xi ftehim milħuq. S’issa dan għadu mhux ċar għax ovvjament ħadd m’hu ser jikxef x’ġara, għalmenu għalissa.

Issa bdiet tiżviluppa fażi oħra tal-istorja. Il-mistoqsija hi dwar jekk il-Gvern Malti (u kwlaunkwe Gvern ieħor fl-Unjoni Ewropeja) għandux id-dritt assolut li jiddeċiedi dwar iċ-ċittadinanza. Minn dak li qalet il-Kummissarju Viviane Reding nhar il-Ħamis hi u tiftaħ id-dibattitu fil-Parlament Ewropew l-Unjoni Ewropeja hi tal-fehma li d-dritt li tkun irregolata ċ-ċittadinanza m’huwiex dritt assolut tal-istati membri. Reding qalet hekk:

“While I am not calling for the Commission to receive legal power to determine what constitutes nationality or the rules granting it, the Commission nevertheless expects that Member States act in full awareness of the consequences of their decisions.

Our debate today shows the growing importance of these questions in a European Union where national decisions are in many instances not neutral vis-à-vis other Member States and the EU as a whole. It is a fact that the principle of sincere cooperation, which is inscribed in the EU Treaties (Article 4.3 of the Treaty on European Union), should lead Member States to take account of the impact of decisions in the field of nationality on other Member States and the Union as a whole.”

Fi ftit kliem il-Kummissarju Reding qed tgħid li f’dak li nagħmlu bħala pajjiż irridu ta’ bil-fors nagħtu każ tal-impatti fuq il-pajjiżi l-oħra membri tal-Unjoni. Hi tirreferi għall-artiklu 4.3 tat-trattat dwar l-Unjoni u speċifikament dwar il-prinċipju ta’ kooperazzjoni sinċiera, xi drabi imsejjaħ ukoll il-prinċipju ta’ lejalta’. Dan kollu jfisser ħaġa waħda biss: li għandna d-dritt li niddeċiedu kif irridu sakemm ma neffettwaw lil ħadd. Jekk id-deċiżjoni tagħna bħala pajjiż teffettwa lil ħaddieħor għandna l-obbligu li nikkonsultaw. Iktar ma hu kbir l-impatt iktar irridu nikkonsultaw u allura iktar hu diffiċli li nikkonkludu kif irridu.

Iktar ċari minn hekk l-affarijiet ma jistgħux ikunu!

Issa hawn min qed isemmi skemi f’pajjiżi oħra li jixxiebħu mal-iskema tal-Gvern Malti. Euroactiv.com   iktar kmieni din il-ġimgħa jirreferi għal dokument iċċirkulat fi Strasbourg mill-Gvern Malti li fih jirreferi għal skemi f’pajjiżi oħra dwar ċittadinanza : “Cyprus, Austria, Belgium and Portugal singled out” jgħidilna l-Euroactiv.com. L-iskemi l-oħra huma differenti, ghax prinċipalment huma ibbażati fuq residenza flimkien ma investiment sostanzjali. Tnejn mill-pajjiżi imsemmija (Ċipru u l-Portugall) għandhom ukoll problemi finanzjarji kbar.

S’issa jidher li l-Unjoni Ewropeja ma ikkummentatx dwar dan kollu imma jidher li issa ser tieħu passi. Il-każ ta’ Malta hu l-iktar sfaċċat imma l-każi l-oħra jixxiebħu u probabbilment li l-Unjoni  tikkummenta dwarhom ukoll.

Dan hu l-pass li jmiss. Minn kif tkellmet il-Kummissarju Reding jidher li d-diskusjsoni interna saret u l-ideat huma ċari. Ħames xhur oħra tiġi fi tmiemha l-ħajja tal-Kummissjuni preżenti u allura nistenna li fil-ġimgħat li ġejjin (ferm qabel ma jinbiegħ l-ewwel passaport),  inkunu nafu x’ser tagħmel il-Kummissjoni.

Il-Gvern jidher li ma kienx ippreparat għal dak li ġej. Kuntrarjament għal dak li qed jingħad il-vot tal-Parlament Ewropew għandu sinfikat kbir. Mhux biss huwa dikjarazzjoni politika qawwja. Imma jiftaħ għajnejn Muscat li l-unika appoġġ li għandu huwa ta’ politiċi bħal Marine Le Pen!