Issue link: https://maltatoday.uberflip.com/i/1120087
13 UNDERSTANDABLY, discus- sion of Malta's position in the EU has focussed on our perfor- mance during the first fifteen years of full membership of the Union. However, possible developments during the next five years should be deemed of equal interest. We need to think more about the alternative scenarios that could emerge in coming years to affect our economic and social situation. Decisions taken in Brussels are sure to condition what happens in Malta. That was the case during these last fifteen years, in ways that most often, Maltese people do not realize. They only wake up and start caring when it is too late. Economic strengths To be sure, the economic upsurge of the last five years or so convinced most peo- ple that EU membership has been a good thing. Concerns about negative side-effects of the recent growth though in- creasing, remain a minority concern. Those who were directly and badly affected by membership have either compensated for it by turning to growth areas, died out or have lost effective voice in the country's govern- ance. What is frequently over- looked is that our economic strengths are now concen- trated in areas of activity which lie outside the purview of EU single market policies: tourism, construction, finan- cial (including maritime and freeport) services, i-gaming and possibly in a short while blockchain, AI and related technologies. In all these areas EU regula- tion and policy making are at best minimal. Meanwhile, traditional growth areas continue to have problems to cope – like agri- culture (which is being slowly strangled) and manufacturing (also in retreat compared to fifteen years ago, and having to import cheap labour in or- der to remain competitive). In the next five years, Mal- ta's interest is to maintain the momentum and com- petitiveness of its growth sec- tors, while hopefully trying to nudge its failing ones towards a better performance. It is going to be a tough chal- lenge. Tax harmonisation Ideally for Malta, what has flourished outside single mar- ket constraints had best re- main like so. Pan-European regulation of areas in which financial services thrive would restrict the flexibility which Malta has enjoyed (along with others) in providing them. Unfortunately, the belief has grown in Europe that the countries which provide financial services, are help- ing tax dodgers, from corpo- rate transnational giants, to crooked politicians and all other sorts of crooks, whose main interest is to shield tax- able or illgotten gains from investigation by tax officials and policemen. This has angered workers, the self employed and pen- sioners, and has mobilised trade unions and many em- ployers' associations. Con- sequently, the need to har- monise taxes on corporate and other taxes has become a popular cry. With varying emphasis, it has been adopted by the Eu- ropean Commission; by many members of the European Popular Party (mainly but not only, when proposing that a European corporate tax policy should no longer be subject to unanimous agreement among member states); as well as by socialists, greens and the hard left (by way of setting a mini- mum level of corporate tax). Equally on board are the var- ious populist strands, which rail against tax abuses com- mitted by powerful, cosmo- politan elites and transnation- al companies. For all these, providers of financial services are "tax havens" which tax harmonisation would help to constrain. Thus, putting tax matters under a qualified majority decision system would short circuit Malta's best defence – unanimous decision-making – against getting shoved into tax harmonisation. The move has been proposed by Jean Claude Juncker, the EPP's President of the Com- mission and endorsed by the EPP's spitzenkandidat at this May's European Parliament elections Manfred Weber. The likelihood is that if their proposal is carried forward, it will have the backing of so- cialists, liberals, greens, you name it, every group in the EP. The approach To contest it, sole reliance on the unanimity rule would be hazardous. It would spark further al- legations against Malta's in- tegrity and determination to control tax abuses. The Mal- tese approach should be to insist we stand four square against abuse. To make this clear, we need to back full transparency on tax matters regarding who is who, who pays what and how and where. This may be too strong a medicine for some financial services practition- ers, but it would need to be applied strongly across the board. Meanwhile, we need to focus on and propagate facts-based arguments to emphasize that financial services occupy an important economic and fi- nancial niche that is crucial to ensure fluidity in post-mod- ern economies. So, the premise that tax har- monisation would restrain hugely tax abuse has to be challenged head-on – not just in political but also in techni- cal terms. For instance, no tax in the EU is as "harmonised" as VAT. Yet, VAT abuse is much more rampant that corporate tax abuse. Harmonisation is therefore not as effective a tool as is claimed against the sins of tax evasion and avoid- ance, agressive tax planning and so on. Finally and just as impor- tantly, during the next five years we need to fully sup- port the effort to reverse the decline in social protection triggered by EU decisions taken since the 2008 financial crisis. Moves to assert a social Europe are in the European interest, and in Malta's inter- ests. On this wavelength, we should defend the thesis that well regulated financial ser- vices and transparent tax flex- ibility in policy-making com- plement the measures which are needed to reaffirm a social Europe that also takes proper account of the needs of pe- ripheral economies like ours. maltatoday | WEDNESDAY • 22 MAY 2019 Where Malta should stand Alfred Sant is a Labour Party MEP and is seeking reelection OPINION Afred Sant In the next five years, Malta's interest is to maintain the momentum and competitiveness of its growth sectors... It is going to be a tough challenge www.creditinfo.com.mt info@creditinfo.com.mt Tel: 2131 2344 Your Local Partner for Credit Risk Management Solutions Supporting you all the way maltatoday | WEDNESDAY • 22 MAY 2019 Frans Timmermans, the European Socialists' lead candidate for European Commission president, has proposed a 18% uniform corporate tax rate across the EU