Malta is preparing proposals to protect its corporate tax system from efforts by larger countries to introduce a new minimum rate of 15%, Finance Minister Clyde Caruana said Tuesday.
He said the Treasury Department will submit a comprehensive proposal to the Organization for Economic Co-operation and Development (OECD) by October discussing the introduction of a global minimum tax rate.
Caruana spoke to the Times of Malta on the sidelines of a major financial services conference organized by Finance Malta.
Treasury Secretary Clyde Caruana.
Wealthy democracies earlier this month approved an OECD proposal to introduce a minimum corporate tax rate of at least 15% in hopes of stopping a “race to the bottom” as nations, including Malta, compete for the lowest rates.
Malta offers international businesses a 5% effective tax rate through a range of refunds and related schemes. This attracts foreign companies to settle on the island, which leads to high tax revenues for the public coffers.
The OECD’s proposal is one of two pillars of reforms that would also allow countries to tax a share of the profits of the world’s 100 most profitable companies – such as Google, Facebook and Apple – regardless of where they are based.
Global Minimum Tax Agreement: What You Need To Know
Caruana told the conference on Monday that the OECD tax discussion was an “elephant in the room” that he wanted to address directly.
“At the moment we have a proposal that is supported by 130 countries around the world. I’ve been involved in various discussions over the past eight months. There are countries that need to generate more revenue and so there is pressure here, ”he said.
Earlier this month, Malta was among 130 countries that said they support plans for fairer tax rules.
Caruana said that if Malta had simply spoken out against the reforms, it would have been excluded from the ongoing discussions.
“Countries that do not agree are simply asked to leave the room. We want to be part of this discussion, so we finalize our own proposals and we will pass them on, ”he said.
Undeniably, Malta has been graylisted
Turning to the other elephant in the room, Caruana said there was no denying that Malta had been placed on the so-called gray list of untrustworthy financial jurisdictions.
The global Financial Action Task Force put Malta on a list of countries last month that must sign a reform plan to improve law enforcement effectiveness.
“It is true that Malta is on the gray list, but that doesn’t mean we should stop looking to a more correct future,” he said.
He said Malta failed a similar review by the Council of Europe’s MoneyVal two years ago. The country’s institutions had responded by launching an aggressive reform offensive that resulted in the country passing a subsequent MoneyVal test without any problems.
Caruana said he was confident that Malta would also convince the FATF that Malta was effective in the fight against money laundering.
Later during the conference, local experts said they had an ambitious plan to whitelist Malta in just 18 months.
Independent journalism costs money. Support Times of Malta for the Price for a coffee.