Malta will be losing its strongest tax harmonisation ally when Britain leaves the EU, stakeholders were warned on Wednesday.
“The biggest risk for Malta as a whole and for Maltese businesses will come after Brexit, when the island sits at the EU negotiation table without Britain,” Marisa Xuereb, managing director of Raesch Quarz Ltd told a panel discussion themed ‘Is risk still risky if you can see it coming?’
Brexit is just 156 days away.
Speaking at the EY Malta’s Annual Attractiveness Event she said businesses had not yet sensitised themselves enough to the issue of tax policy – an important issue when it comes to Malta’s attractiveness as a business location.
“Without Britain in the EU, tax harmonization becomes a very different ball game for us. Britain was the leader of the anti-tax harmonization movement – without Britain we will lose a very strong ally and we are left very much alone with Cyprus.”
Reacting, Parliamentary Secretary for EU Funds Aaron Farrugia noted that Malta needed to caucus with other countries facing the same challenges when it comes to the fiscal regime, now that the "big brother was leaving".
"I think that no matter what, we should maintain a special relationship with the UK, while pushing for co-location. Companies will not leave the UK and base themselves in Malta, however, they can co-locate, and so far Malta has attracted some Indian businessmen and insurance companies among others."
Mr Farrugia said he believes that a Brexit deal will be reached by March, however the headache remains the EU budget post-2020, considering that Britain is the second largest contributor.
All member states will have to do more with less and be more efficient with the budget, while some, such as Sweden, Denmark and Austria, are pushing for a smaller budget, he added.
Despite this, 77% said the UK’s decision to leave the EU had no impact on their business operations in Malta to date.
Ms Xuereb noted that until the parameters of Brexit were defined, businesses had no risk to quantify – "we have just uncertainty, and uncertainty is not risk".
“There are a few of us - manufacturing businesses that have a substantial market in the UK - are clearly exposed, however they are being supported by the Malta Enterprise (ME).”
Addressing the same panel, ME chair William Wait meanwhile noted that unlike foreign direct investors, Britain seemed to be in panic mode.
ME was mainly focused on the manufacturing sector and not all Maltese manufacturers were operating and trading with Britain. So although it did have general schemes and support systems, it worked mainly with individual companies on a one-on-one basis because each company had its specific challenges.
At the moment it was very difficult to come up with some kind of support or plan for individual companies as even they were unsure of whether or how Brexit will affect them, he said.
However, he added that Malta had the opportunity to encourage companies in the UK to open a branch here, so that when Brexit kicks off they would still have a foot in the EU.
Speaking from the floor, British High Commissioner to Malta Stuart Gill refuted the notion that Britain was in panic mode.
“We are where we thought we would be at the beginning of the process…. we are at the pointy end of negotiations and it was never going to be straightforward.”
Commissioner Gill said Britain was very close to a deal, with the remaining key issue being Ireland's border.
Britain will leave the EU but it will have as close a relationship with the EU as it can possibly get, he added.