Sven Giegold’s tax haven report and the moral high ground

Follow by Email

Malta’s taxation regime for foreign companies is once again under scrutiny. Billed as a tax haven by a report commissioned by Green MEPs in the European parliament, it is alleged that this same taxation system has helped multinationals avoid paying €14bn (£12.1bn, $14.8bn) in taxes between 2012 and 2015.

Sven Giegold, the Greens’ economic and finance spokesperson, told British newspaper The Guardian: “The tax system in Malta is generous to say the least, with large companies routinely paying as little as 5% tax on their profits. This is completely unacceptable and raises serious questions.”

This same report penned by Tommaso Faccio, of Nottingham University’s Business School has prompted a heated response from Finance Minister, Edward Scicluna, who has dubbed the report as “unprofessional”.

This is not the first time that Sven Giegold has shone a spotlight on Malta and certainly never for the best of reasons.

In June of last year reported that Mr. Sven Giegold has been raising questions on the conflicts of interest that Prof Bannister has as a Chairperson of the Financial Services Authority. He also put into question the ability of the Authority to handle delicate situations such as the case of Nemea Bank and  that of Settanta (read full article here).

In September, also of last year, this portal quoted a report published in the hard hitting German newspaper, Der Spiegel, wherein Giegold not only alleged that MFSA’s Chairman Bannister had held directorships in the Cayman Islands, but also that Malta is one of the tax havens in the EU (read full article here).

Back to Giegold’s “Is Malta a Tax Haven?” report (read full report here), it is worthy to note that Malta’s tax regime was reviewed by the Commission prior to the country’s accession to the EU in 2004. In the meantime, Finance Minister Scicluna insists that competitive tax rates do not make Malta a tax haven. Indeed, tax competition is something which many jurisdictions, including the US and the UK, are implementing.

Italian newspaper Italia Oggi also reports that Malta rejects accusations of being an offshore tax haven as claimed by the Greens EU parliamentary group. Same reportage quotes Minister of Finance, Edward Scicluna who confirmed that Malta has a low tax but “that does not mean that we are a great place to evade taxes.” For Scicluna, continues Italia Oggi, a tax haven is a combination of secrecy, low taxes, corruption and hidden money. With regard to corporate tax, it has been confirmed that the applied effective taxation is equal to 5% but those same companies are taxed in the country of origin of the shareholders.

Throughout this scenario, Malta’s credit rating was upgraded last October, for the first time in 20 years to A- from BBB+ by Standard & Poor’s off the back of strong economic and fiscal growth, which begs the question; how much can we afford to revert to the moral high ground as proposed by Giegold as opposed to the growth and wellbeing of our small island nation?