Government wants to “make an exception” for digital companies and tax them on revenues earned in the countries where they are providing services rather than on profits, Finance Minister Edward Scicluna said this morning, addressing a pre-Budget breakfast.
This stance contrasts with that of the European Parliament and European Commission, both of which want to have multinational corporations paying taxes where they are earning their revenues.
The government earns high revenue on foreign company profits due to the rebate system that allows those companies to effectively pay five per cent corporate tax in Malta, so the move suggested by the EP and EC is seen to be highly disadvantageous.
"Malta's stand is yes, companies have to pay their tax somewhere. This is being discussed by the OECD. If the EU has any bright ideas, they should be sent to the OECD so that we can involve China and the US. Unilateral decisions by the EU can have serious effects and should be discussed in the ambit of the OECD," Prof. Scicluna said.
Prof. Scicluna also warned that any "unilateral decision" by the EU could have serious effects – China and the USA could respond by making their tax jurisdictions more favourable, which would draw investment away from Europe.
Prof. Scicluna also stated that tax evasion is high on the government's agenda: a joint enforcement taskforce has been set up in order to "have a serious look at the Inland Revenue Department in terms of software and operations".
Government will also be setting up a new appointment of Permanent Secretary tasked with restructuring the revenue department and helping it deliver better results.
"We want a firm, tough but fair revenue department," Prof. Scicluna said.