“ Professor Scicluna addressed the 2016 annual tax
conference which took place yesterday, entitled ‘towards a fair and efficient
tax system?’
In November 2014, the International Consortium of
Investigative Journalists (ICIJ) revealed a number of Luxembourgish tax rulings
which were offered to over 300 cross-border companies – these rulings were previously
secret and exposed how these multimillion companies have been employing
aggressive tax practices to avoid paying their fair share through the
assistance of countries such as Luxembourg.
The difference between how Malta has been offering
preferential tax agreements as opposed to other member states such as
Luxembourg is that it does not offer tax rulings. This refers to a country’s
ability to negotiate a taxation agreement specific to a cross-border company.
Another area where Malta differs is that it publishes all taxation agreements
and does not offer hidden tax credits.
“We will defend our tax regime – we will explain, discuss
and compromise – but we will defend it,” Finance Minister Edward Scicluna said
against a backdrop of mounting global pressure to clampdown on multibillion companies
avoiding tax.”
“We are clearly showing that Malta is serious about
tax avoidance on a global level, however what we are defending – and we have
every justification to do so – is our sovereign choice to keep our tax regime,
which is what you see what you get.
“We do not have tax rulings like certain countries have for
one company against another, or hidden credits. In addition to this, we are
more restricted than The Organisation for Economic Co-operation and Development
(OECD) is suggesting regarding interest. It is our country which will decide
what level of taxation we want to impose, without distinction.”
He went on to speak about why it is important for taxation
not to be overly burdensome, and why it is necessary for Malta to set its own
tax rates:
“From an economic point of view, taxation should interfere
as little as possible with the individual’s choices. It is bad enough that you
require citizens to contribute to goods and services that you want to consume
collectively – and that’s fine – but at least do not place an added burden. The
bottom line is that tax should not be interfering with an individual’s
[purchasing] choices.”
He further elaborated that it is within a sovereign
country’s remit to choose whether they want to boost private consumption or the
consumption of public goods, by lowering or increasing taxation respectively.
With regard to country-by-country reporting, which refers to
multinational companies drawing up reports on the operations of each country
they operate in, Professor Scicluna believes that this information should be
limited towards a country’s tax authorities.
“Country by country reports should be at the level of the
tax authorities, we do not want to push sensational reporting to the media so
that they decide which companies they are going to name and which they are not.
The media has its own responsibilities but it can also turn into a circus,
internationally speaking.”
The publication of 11.5 million documents of Panama-based
law firm Mossack Fonseca’s dealings with clients has reignited pressure for
more global financial transparency. Professor Scicluna stressed that the fight
for more transparency and fairness cannot be dealt with one particular region
of the world, but has to be a global effort in order to be truly effective.”