Issue link: https://maltatoday.uberflip.com/i/1368703
3 NEWS 6.5.2021 'There are ways and means of doing this without hurting local businesses' FROM PAGE 1 It effectively allows shareholders of a foreign company to pay 5% tax on the profits generated globally once they get kicked up to a "Maltese" parent compa- ny. On Tuesday, Grech said that while the country should welcome foreign invest- ment, local businesses could not be dis- advantaged due to higher taxation rates. "e system will strengthen the bar- gaining power of Maltese businesses, because at the end of the day, they are competing for the same market," he said. Mamo agreed and said that, as things stand, the system was "very unfair" for local competing businesses. "We too are not against giving incen- tives to foreign investors in Malta," she said. "But there are ways and means of doing this without hurting local busi- nesses." Mamo insisted the system could still apply for certain sectors. "e situation is that if an Italian opens a retaurant in Valletta, he will pay just 5% tax," she said. "While this makes sense for large gaming companies which employ Maltese people, it doesn't make sense that this also applies to businesses such as restaurants." She said the system effectively treated local ventures as second-class enter- prises. 'Suicidal' But while the PN and SMEs Chamber might be on the same page as to equal tax rates for both local and foreign busi- nesses, Prime Minister Robert Abela has already made it clear he has no in- tention of changing Malta's competitive taxation system. In January 2020, days after being elect- ed Labour Party leader and prime min- ister, Abela said the removal of the tax advantage for foreign companies would seriously threaten the Maltese econo- my. And although during that election campaign he had initially said Maltese companies were being placed at a dis- advantage compared to their foreign counterparts due to the tax system, Ab- ela later said he had been grossly mis- quoted on the matter. "It would be suicidal for Malta if the 5% system were to be removed," he said then. "I did not say I would do that, and I am not going to do that." EU tax harmonisation Malta is under immense pressure by the EU, which is more intent than ever on a minimum level of taxation across the bloc. Caruana also said Malta's taxation sys- tem may have to be tweaked to placate international disquiet because, although Malta was doing nothing wrong, it had to be "astute" when trying to convince others. "We need to defend [the taxation sys- tem] and convince others but we also have to change where necessary be- cause it will be useless to battle against the tide and stamp our feet... we need to be astute," Caruana told business opera- tors and stakeholders in January. He said said earlier this year that only three other EU member states - Ireland, Cyprus and Luxembourg - . He said Malta would seek to build bridges with Ireland, Cyprus and Lux- embourg, the only other three EU member states which disagree with the argument in favour of minimum taxa- tion levels to ensure they all present a common front against tax harmonisa- tion. Finance minister Clyde Caruana said Malta had to be "astute" when trying to convince others of its taxation system