Issue link: https://maltatoday.uberflip.com/i/827430
3 maltatoday, WEDNESDAY, 24 MAY 2017 News PORTOMASOLIVE.COM REGISTER NOW 1 2 3 Register your personal account JOIN DEPOSIT EARN CASHBACK Place your deposit, play & participate in our promotions You're always a winner at Portomaso Live You're always a winner Reliance on corporate income taxes higher than EU average CONTINUED FROM PAGE 1 "Malta is the only EU Member State utilising the full imputation sys- tem of company taxation and it offers a refundable tax credit scheme," the Commission said of the six-sevenths rebate on corporate tax paid by foreign companies tax-resident in Mal- ta. But it also said that Malta had an extensive network of dou- ble taxation treaties, and an at- tractive tax residency status for individuals. "The supervision of the internationally-oriented business, however, is challeng- ing. The financial sector carries out most of its activities outside Malta," the Commission said. Financial services are one of the cornerstones of the Maltese economy. They accounted for 6.7% of the gross value added in 2015, higher than the euro area average (4.9%). And the financial services sector remained one of the main employers, accounting for 5.2% of total employment in 2015, two times higher than in the euro area. But the Commission said the supervision of the internation- ally-oriented business was chal- lenging. "The financial sector carries out most of its activities outside Malta. The ability of a relatively small supervisory au- thority to oversee a large system, in particular in the insurance sector, but also in banking is un- der pressure… "Even if potential weaknesses in internationally-oriented in- stitutions do not pose direct risks for domestic financial sta- bility, the reputation of the juris- diction could be put at risk." The EC also said that the reli- ance on corporate income taxes in Malta was higher than the EU average. While the share of tax- es on production and imports is in line with the EU average, the share of current taxes on income is higher in Malta com- pared to the EU. In terms of GDP, earnings re- lated to corporate taxation have increased by 1 pp. in 2011-2014 (from 5.3% to 6.3% of GDP) while remaining at 2.4% of GDP on average in the EU. "Corpo- rate taxation therefore has stood out as a significant and growing source of tax revenue for Malta in the last few years. Risks to the resilience of tax revenues could come from economic shocks or changes in the area of corporate tax policy." Aggressive tax planning The Commission also said that come of Malta's tax rules may be used in structures of aggressive tax planning. "The absence of certain anti- abuse rules and the absence of withholding taxes on dividends, interests and royalties payments vis-à-vis third countries are fea- tures of the tax system which may facilitate aggressive tax planning. "In that respect, the very high level of inward and outward for- eign direct investments (FDI) positions, the share of those FDI held by so-called 'Special Purpose Entities' but also the high level of dividends or roy- alty payments as percentage of GDP suggest that the country's tax rules are used by companies that engage in aggressive tax planning." A special purpose entity is a legal entity that has little or no employment, operations or physical presence in the tax ju- risdiction where it is located. It is related to another corpora- tion often as a subsidiary, and is typically located in another tax jurisdiction. In 2015, the level of inward and outward FDI stock amounted respectively to 1,646% and 665% of GDP. The share of inward and outward FDI stock held by SPEs amounted respectively to 96% and 98% of GDP. The flows of dividends paid – calculated as net income on FDI – amount- ed to 90% of GDP. The royal- ties paid and received in 2015 amounted respectively to 2.8% of GDP and 4.2°% of GDP. However, the EC said that cor- porate tax initiatives, for exam- ple the amendment to the Par- ent-Subsidiary Directive or the Anti-Tax Avoidance Directive, will strengthen Member States' anti-abuse framework and boost tax transparency – for example through the automatic exchange of information on tax rulings or on country-by-country reports. "Malta has taken steps to ad- just some of its tax rules facili- tating aggressive tax planning. In line with Action 5 of the Base Erosion and Profit Shifting project (see OECD, 2015) as en- dorsed by the Code of Conduct for Business Taxation, Malta took measures to close the ex- isting patent box regime." Busuttil allegations on Schembri forwarded to new magistrate MATTHEW VELLA TIM DIACONO THE Office of the Prime Minister has announced that a request by the Opposition to present new evidence to Magistrate Aaron Bugeja, currently investigating the 'Egrant' Panama company allegations, has been for- warded to a new magistrate. The evidence concerns ac- cusations by PN leader Si- mon Busuttil, that the prime minister's chief of staff, Keith Schembri, paid €650,000 to the former Allied Group managing director, Adrian Hillman, through an off- shore company between 2011 and 2015, which Busut- til claims is a "textbook case of money laundering". Schembri's Kasco Group supplied Allied with news- print during this time pe- riod. Busuttil insisted on taking his evidence to Magistrate Bugeja, a move that Prime Minister Joseph Muscat de- scribed as a delaying tactic to bog down the Egrant inquiry. The OPM said Magistrate Bugeja will be taking the evidence to be inquired into by another magistrate, as he originally did with other ac- cusations brought against Schembri by Busuttil, which are now under inquiry by Magistrate Natasha Galea Sciberras. "As happened in the first case, the Opposition leader took evidence with him that has nothing to do with the lie concocted about the prime minister and his family," the OPM said in a statement "The magistrate also warned the Opposition lead- er that he had avenues other than that of taking his re- port to the magistrate. This confirms that the Opposi- tion leader is only playing for time to cover up his own lies." In reaction, Busuttil said the magisterial inquiry into allegations that the Prime Minister's wife owns the secret Panama company Egrant will not be published before the election. Reading out the decree by magistrate Aaron Bugeja at a political activity in Paola, Busuttil said that the inquiry has proven to an incredibly complex one that will re- quire the aid of experts – in- cluding foreign ones – both on a local and international level. "The magistrate said that he understands the importance of closing the inquiry as quickly as possible, consider- ing it is of a delicate nature and of national importance," he said. "He and the police officers aiding him in his in- vestigations have been work- ing round the clock since 20 April, including Sundays and public holidays. However, the inquiry is so complex that it requires several processes, examinations and data anal- yses that by their nature take up a considerable amount of time and signficant costs. "The decree shows how seriously the magistrate is conducting the investigation and how committed he is for it to be published as soon as possible," he said. "However, he cannot take shortcuts and doesn't intend to." Busuttil said that the mag- istrate's decree means that the public will take to the polls on 3 June with the Prime Minister still under a criminal investigation, a situation he described as un- precedented in Maltese his- tory. "This means that the world will be looking at us even more so on 3 June, to find out whether we will choose a Prime Minister who is under criminal investigation or a Prime Minister who wants to clean the country's political system once and for all and to turn this black page that Joseph Muscat has written in Malta's history?