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

Wara r-Referendum fir-Renju Unit

 

It-tmexxija tal-Unjoni Ewropeja ddikjarat li wara r-riżultat tar-referendum ikun jaqbel għal kulħadd li r-Renju Unit idabbar rasu malajr kemm jista’ jkun. Għaldaqstant qed issir insistenza biex jibda minnufih il-proċess tat-tluq skond il-proċeduri kif stabilit fl-artiklu 50 tat-trattati tal-Unjoni.

Imma r-Renju Unit m’jidhirx li għandu għaġġla. Anke għax hemm min qed jirrealizza li l-ħsara li ser isseħħ hi kbira wisq u allura qed jerġa’ jibdielu. Ironikament, il-maġġoranza tal-Membri Parlamentari ma jaqblux li r-Renju Unit ma jibqax membru tal-Unjoni Ewropeja!

Meta David Cameron nhar il-Ġimgħa fil-għodu ħabbar ir-riżenja tiegħu minn Prim Ministru tar-Renju Unit, huwa qal li l-proċess tan-negożjati għat-tluq mill-Unjoni Ewropeja ser iħallih għas-suċċessur tiegħu. Dan jista’ jkun Boris Johnson, sa ftit ilu Sindku ta’ Londra, imma jista’ jkun ħaddieħor ukoll bħal Theresa May presentment Segretarju tal-Istat għall-Intern fil-Kabinett immexxi minn David Cameron. Dan ifissser li tal-inqas baqa’ tlett xhur, imma ma hemm l-ebda garanzija li f’għeluq dawn it-tlett xhur dan il-proċess ser jibda. Dan minħabba li l-politika u l-istrateġija tat-tmexxija l-ġdida għad mhiex magħrufa, dejjem jekk din teżisti.

Fil-fatt, Boris Johnson diġa iddikjara li m’hemmx għaġġla biex ir-Renju Unit jitlaq mill-Unjoni Ewropeja. X’għandu f’moħħu mhux magħruf imma minn dak li ntqal waqt il-kampanja referendarja ma jidhirx li s’issa hemm xi pjan dwar kif jista’ jseħħ it-tluq tar-Renju Unit mill-Unjoni Ewropeja. Minn dak li nkiteb fil-gazzetti Ingliżi jidher li għandu mnejn issir emfasi fuq negozjati informali u dan biex ikun evitat li jibda jgħodd il-limitu ta’ sentejn li jistabilixxu t-trattati Ewropej, liema limitu jibda jgħodd minn meta tingħata n-notifika skond l-artiklu 50. Imma fl-Unjoni Ewropeja ma hemmx qbil ma dan. Sadanittant hemm petizzjoni għaddejja online li sal-ħin li qiegħed nikteb kisbet l-appoġġ ta’ madwar tlett miljun persuna. Din il-petizzjoni qed titlob li r-referendum isir mill-ġdid. Il-Parlament ser jiddiskuti din il-petizzjoni.

Fl-istess ħin hemm reazzjonijiet qawwija mill-Iskozja, l-Irlanda ta’ Fuq u minn Ġibiltà għar-riżultat referendarju. Fit-tlett każi dawn huma favur il-kontinwazzjoni tas-sħubija. Fil-kaz ta’ Ġibiltà hemm ukoll il-kumplikazzjoni tal-possibilità tal-egħluq tal-fruntiera minn Spanja (kif ġieli ġara fil-passat) liema egħluq teffettwa lil madwar 12,000 resident li kuljum imorru Spanja għax xogħol. Il-possibilità ta’ kontrolli mal-fruntiera bejn l-Irlanda ta’ Fuq u r-Repubblika Irlandiża l-anqas ma hu ta’ awgurju tajjeb.

Id-dewmien biex jibdew it-trattattivi għat-tluq ifisser iktar inċertezza għas-swieq finanzjarji, li minnha jbati kulħadd. Inkluż l-ekonomija globali.

Jekk inħarsu lejn kif żviluppaw ir-relazzjonijiet bejn pajjiżi bħall-Isvizzera u n-Norveġja mal-Unjoni Ewropeja insibu li dawn japplikaw partijiet sostanzjali mill-leġislazzjoni tal-Unjoni Ewropeja, inkluż il-moviment ħieles tal-persuni u r-regoli tas-suq wieħed. Dan apparti kontribuzzjoni finanzjarja sostanzjali lill-Unjoni bħala ħlas għall-aċċess għas-suq Ewropew. Dawn kollha affarijiet li Boris Johnson u l-kampanja favur it-tluq tar-Renju Unit mill-Unjoni tkellmu kontra tagħhom waqt il-kampanja referendarja.

X’ser jagħmlu issa? Kollox hu possibli. Imma jekk il-mudell Svizzeru u Norveġiż ikun skartat huwa diffiċli ħafna biex wieħed jifhem x’ser jiġri. Tajjeb li niftakru li meta riċentement l-Isvizzera approvat referendum kontra l-prinċipju tal-moviment ħieles tal-persuni qamu l-irwiefen kollha. Għax il-prinċipju tal-moviment ħieles tal-persuni huwa bażiku għall-Unjoni.

Jidher ċar li quddiemna għandna ġimgħat ta’ spekulazzjoni li ma huma ser jagħmlu ġid lil ħadd. La lir-Renju Unit u l-anqas lill-Unjoni Ewropeja. L-anqas m’hu ser tagħmel ġid il-gwerra ċivili fil-partiti ewlenin Ingliżi. Il-battalja għat-tmexxija tal-Partit Konservattiv ser tkun qalila. Imma issa reġgħet tfaċċat il-gwerra ċivili fil-Partit Laburista Ingliż ukoll bir-riżenji mix-Shadow Cabinet u mozzjoni ta’ sfiduċja fit-tmexxija.

Ser ikunu ġimgħat ta’ tibdil kbir.