An analytical report on the Republic of Malta, commissioned by a political party in the European Union, has reportedly concluded that the country, by virtue of its laws and practices, should be classified as a tax haven. The white paper, which was written by an accounting professor at Nottingham University Business School, at the request of the Green Party, constitutes clear and convincing evidence that corporations who choose Malta as their domicile are required to pay an extremely small amount of tax on their profits.
According to statements made by Green Party MEPs, who have quoted extensively from it, Malta has a declared corporate tax rate of 35%, but dividend and other exceptions pare it down to an effective 5% rate, for corporations, which is far below the tax rates of Western European nations that are members of the European Union. Some intellectual property companies actually enjoy a actual tax rate of zero per cent.
This extremely favorable tax rate has cost the nations of EU, where those corporations originally were formed and operated, has reportedly been more than €14bn in lost revenues; this money would have gone to the renewal of infrastructure, payment for social services, retraining of employees, and in many other vital sectors of their budgets.
This news comes at a time when Malta, have succeeded on January 1 to the rotating presidency of the EU, is still reeling politically to the fact that two senior Maltese politicians have been named & shamed in the Panama Papers, and have still not accounted for undeclared wealth now linked to them. Additionally, there are many unanswered questions about its controversial economic citizenship program, which is not favored by many in Malta, and in the EU, as it grants participants complete Schengen Zone access, which could facilitate crime and terrorist financing inside Europe.
Will the EU committee, now charged with the preparation and publication of a comprehensive tax haven blacklist, actually name Malta, an EU member, to that list ? We cannot say, but if it fails to do so, questions about its accuracy may be asked, by compliance officers outside Europe.
Contributed by Kenneth Rijock
Journals of Monte Friesner