Issue link: https://maltatoday.uberflip.com/i/1418273
10 maltatoday | SUNDAY • 10 OCTOBER 2021 OPINION Raphael Vassallo 'The day the strength of Malta failed…' AS you will probably already have noticed, I have a certain fondness for using memorable quotes as headlines. There's a reason for that, you know; and oh look… I can sum it up in a single (rather famous) quote, too: "Seek, and ye shall find". Yes, indeed, folks. My expe- rience has taught me that, no matter what your article is ac- tually going to about: there will always (but ALWAYS) be some kind of snappy little one-liner, somewhere, that will fit it like a glove. (Or as Liam Neeson puts it in 'Star Wars Episode One – The Phantom Menace': "There is always a bigger fish…") Then again, however: there are also those famous quotes that I've always wanted to use… but somehow never found the right opportunity. And there's one in particular that I've my eye on since… ooh, 2002, I think. (Or whenever the first instalment of Peter Jackson's 'Lord of the Rings' trilogy came out.) This one, to be precise: "I was there, three thousand years ago. I was there, the day the strength of [Malta] failed…" Ok, let's overlook the minor technical difficulty that… for the sake of chronological ac- curacy, I'd have to wait until at least October 8, 5,021 to actually use it... (even if I could easily by- pass that obstacle, just by argu- ing that… um… "The Future is Now!") No: personally, I'd like to think the real reason I never used it before is… well… a bit like an- other little quote from 'The Lord of the Rings' (the book, this time): "Courage is to be found in the unlikeliest of places." To put that another way: I never really expected a little country like Malta to successful- ly (and indefinitely) resist wave after wave of orcish attacks on its national tax sovereignty… at least, not when so many other small European countries had already capitulated on the same issue. Cyprus, Luxemburg, Ire- land, Latvia, Estonia, Hungary, Gondor… (speaking of which: Where WAS Gondor when all this happened, anyway…?) In any case, you can see where all this is heading. "Our list of allies", so to speak, "has grown thin." And it is hardly realistic to expect that Malta – alone, unaided, and without even any Eagles to come flying to the rescue at the end - would sin- gle-handedly stave off the in- vading hordes… FOREVER. This was never likely at the best of times: still less, when the assault itself took the form of a common, mutually agreed policy by the OECD: in other words, the equivalent of a 'Last Grand Alliance', under the control of the world's richest and most powerful countries; a siege that not even the Black Gate of Mordor itself could re- alistically have withstood for long… So make no mistake: it was inevitable that Malta's resolve would eventually crumble, in the end; and that Finance Minister Clyde Caruana would sooner or later be forced, against his will, to cast Malta's 'One Ring' – our only real competitive advantage, in a highly competitive world - into the fires of Mount Doom. But still. All along, I must ad- mit there was a small part of me that held out in hope ("a fool's hope", no doubt) that… erm… wait a second here. Who knows? Maybe Galadriel had a point af- ter all, when she said that: 'the time will soon come, when [the little countries] will shape the fortunes of all'. For, unlikely as it may seem… Malta did (and still does) have perfectly valid arguments, to defend what's re- ally at stake here: i.e., our coun- try's sovereign right to establish its own tax rates, as and how it sees fit. And besides: nothing was re- ally certain until last Friday, either. Before that fateful mo- ment, when Caruana announced that Malta had 'accepted the OECD's tax pact'…. there was still a small chance – OK, make that a microscopic chance – that common sense might actually prevail, in the end. In more realpolitik terms: there was a chance that the govern- ment of Malta might success- fully argue its case, before the Council of Elrond, that… sorry, but this '15% flat tax rate' you are proposing will only create an automatic non-level playing field, for small, peripheral econ- omies that lack any other means of attracting foreign investment to their shores… There: not exactly an uncon- vincing argument, is it? That's probably why it is (or was) the position of the Malta Business Chamber, too: whose president, Marisa Xuereb, recently de- scribed our taxation system as "the only thing that remains, for an EU member state to balance out whatever other disadvantag- es it might have." Funnily enough, it is also about the only issue, in this en- tire country, that both Labour and Nationalist Parties actually agree on, for a change. (Except, perhaps, hunting and trapping; defending the construction in- dustry; relying on businesses for 'donations'; and… erm… a whole bunch of other stuff, now that I think about it…) But never mind all that, for now, because… it was to no avail, in the end. And to be fair to Clyde Caruana, I can't exactly blame him for throwing in the towel, either. (It's like Maxi- mus Decimus said in 'Gladia- tor': "People should know when they're conquered…") All that remains, I suppose, is to look at what sort of 'deal' Malta actually walked away with in the end… and – just to use yet another quote (this time, from Caruana himself): "Every country is bowing its head to the agreement. This is because even if no other country agrees on it, countries can still tax the difference between what Malta taxes locally and that 15% else- where…" Now: apparently (because the article also provided a very help- ful 'explanation to Caruana's explanation'), that translates into: "If a multinational compa- ny with a local branch in Malta pays a 5% tax rate on the island, other countries will still be able to order for the remaining 10% tax to be paid in their home country…." And yes, I suppose it does offer at least a small crumb of com- fort: for the implication there is that any FDIs that Malta may have already successfully at- tracted, in the past, will have no real reason to 'up and leave'. To (unnecessarily) explain it further still: wherever in the world they choose to go, they will still end up paying the same 15% anyway. So… who even cares, ultimately, if 5% of that ends up going to Malta… and the rest to some other EU mem- ber state? All the same, however: "Hou- ston, we have a problem (Actu- ally: make that two. Do you copy that, Houston? Two problems, not one…"). The first is that this compro- mise doesn't address the core argument AGAINST Malta's preferential tax system to begin with: the fact that it clearly dis- criminates against local compa- nies, which do not qualify for the same 30% tax 'discount' offered to foreigners. Naturally, I'm not naïve enough to believe that this injustice – for an injustice it clearly is – was the driving force behind the OECD's onslaught; either way, however, those Maltese companies cer- tainly did have genuine cause to complain about the status quo.