The Single Market Act is the EU institutions’ political programme for revamping the European internal market. In the Commission’s own words, the purpose of the Act is to charter a series of concrete proposals to boost the single market at a time when the EU internal market is perceived to be bereft of momentum by all its market participants.

The Single Market Act carries a total of 50 proposals, some of which are of clear importance to business, while a large cohort of other proposals would indirectly help business to thrive through the resolution of consumer and citizens’ concerns about the single market.

Maltese business welcomes the broad scope of the Single Market Act and its overall objective of revamping the European Single Market. Nonetheless, the key stress of this new package of initiatives should be on the implementation and enforcement of existing single market legislation. This is nowhere more evident than in the case of the single market for services. While the single market for goods has been attained with relatively little difficulties, the cross-border facilitation of business services remains inadequately developed, despite the slow but steady implementation of the Services Directive.

The creation of a European single market in the field of business services is an initiative that should confer considerable potential for growth for Maltese operators in this field. Equally important is the Commission’s pledge to take action for improving market surveillance within the European Single Market. EU guidelines will be developed in the area of product safety in 2011, while the proposed revision of the General Product Safety Directive should enhance the level of consumer goods safety.

Maltese business expects that the Single Market Act will help improve the general deficiencies undermining the proper execution of market surveillance due to the relative weakness of inter-departmental coordination with regard to the enforcement of VAT, eco-tax and food safety legislation at the point of entry for goods shipped from Sicily. This creates unfair competition within the internal market to the detriment of local business operators.

EU taxation of the financial sector

In the run-up to the Seoul G-20 meeting, the European Commission published a communication outlying the policy options regarding the possible introduction of an EU-wide “financial activities tax”. On the EU-level, the Commission is supporting the introduction of a Financial Activities Tax (FAT) which is conceived as a tax on profit and remuneration applicable to all activities of a financial sector company.

The FAT would be a discriminatory fiscal measure in the sense that it wouldn’t be applicable to all operators on the financial markets but it would target financial corporations. According to the Commission paper, a financial activities tax would target the profits and remunerations of financial sector companies, therefore taxing corporations (such as banks and corporate insurance companies) instead of each and every economic operator involved in a financial transaction.

With this approach, the Commission believes that the risks are considerably lower than with a blanket financial transactions tax, because profits and wages (office infrastructure and labour) are less mobile than trading.

It is important to note that the Communication does not constitute an official proposal. It remains for now, a non-binding policy document that informed and guided the discussions of the Ecofin Ministers as well as the EU Heads of State and Government when they convened at the last European Council meeting, when an EU common position was ironed out in view of the G-20 discussions on how to restructure the IMF and the World Bank.

The discussions on a financial activities tax will, however, be taken forward at an EU-level. Clearly, the development of a pan-European tax regime on the financial services industry does not coincide with Malta’s development strategy for the sector. As a growing financial services centre, the adoption of a ‘FAT’ tax would be detrimental to Malta’s economic competitiveness vis-a-vis other financial jurisdictions both within and outside the EU internal market.

The success of the financial services in Malta is attributable to a significant extent on the country’s competitive tax regime and the extensive network of double-taxation agreements that Malta has negotiated and activated with several other states.