Malta opposes EU plans for common corporate tax base

Malta yesterday poured cold water over a proposal submitted by Taxation Commissioner Laszlo Kodak's earlier during the week, proposing an EU-wide corporate common tax base.

Speaking to The Sunday Times from Vienna while accompanying the Prime Minister to a two-day informal meeting for the EU finance ministers, Parliamentary Secretary Tonio Fenech said that Malta opposes the Commission's proposal together with other countries.

"Although we are in favour of discussing the issue together with the other member states our position is clear. It is not in our interest to have such a corporate tax base as being suggested by the Commission. We are not alone in this and our position is shared by other member states. We do not feel the need for such a common tax base."

The Commission wants to propose a harmonised company tax base in 2008 to save money for cross-border firms, as they would not then have to comply with several different tax regimes. The aim would be to replace the 25 different national systems in the EU and enable firms to use the same rules for calculating tax on all their EU-wide activities.

However sources close to the Maltese financial services sector told The Sunday Times that this would be the start of a tax harmonisation system, something which will wipe out the advantages of Malta as a strong financial services centre. The sources added that competition in tax services is one of the most important aspects that foreign companies consider when choosing where to register their companies. Thus, taxation should be a primary element of competition, explained our sources.

On this issue Malta has strong partners. Both Britain and Ireland oppose the Commission's plan publicly while several other states are also unconvinced.

A common tax base would allow a company to offset losses in one member state against profits made in another and revenue would be shared among member states according to how much of a company's business was conducted on their turf.

Commissioner Kovacs said that the European Commission plans to present its legislative proposal in 2008. However taking the current scenario it will be very difficult for the Commission to have its way. Unanimity among the 25 EU members is required for the new tax rules.

The issue was also one of the main subjects on the agenda of the informal meeting of EU finance ministers which ended yesterday in Vienna.

Prior to this meeting Prime Minster Lawrence Gonzi also held a bilateral meeting with the current President of the EU, Austrian Chancellor Wolf-gang Schüssel.