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| The Maltese
presidency of the EU Council is a new entry this
year |
Malta's government has had to deal with a barrage of tax
criticism over the years, but, while it held the EU Council
presidency, it battled through that to deliver the amended
Anti-Tax Avoidance Directive (ATAD) and enact of the dispute
resolution mechanism, among other things.
"The work programme for the Maltese presidency in the area
of taxation was an ambitious one and the reactions received
from our counterparts in the Council, particularly from other
member states and the European Commission, were very positive
and acknowledged the work during our term," Malta's Finance
Minister Edward Scicluna (pictured) tells International Tax
Review. "The outcome of our efforts is a direct rebuke to
the criticism received during our presidency, as it is clear to
many that Malta did manage to lead the charge for tax reform in
the EU."
Malta's six-month presidency, which ended in June 2017, also
included working on the relaunch of the common consolidated
corporate tax base (CCCTB), e-commerce proposals, and the
reduced rates on e-publications proposals. The legacy of its
efforts also lived on under Estonia's presidency (see page
34).
"The Maltese presidency managed to find agreement on a
number of difficult direct and indirect tax files," Scicluna
says, referring to corporation tax and VAT files. "Although
Malta did not manage to conclude the latter, this was only due
to political issues in some member states, and Malta's
technical work is still perceived as having paved the way for a
successful conclusion in the near future."
The EU and its member states have continued to be at the
forefront on implementation of action points in the OECD's BEPS
project, and this has naturally influenced the EU tax agenda.
The directive on anti-hybrid mismatches (ATAD II), agreed in
February 2017, and the Dispute Resolution Mechanism Directive
agreed in May 2017 stem from this wider exercise (BEPS Action 2
and Action 14, respectively).
Scicluna, an avid sailor, notes what this achievement meant
for him: "Modernising and improving the tax landscape within
the EU is a priority for all member states, as global
competitive pressures are particularly pronounced in the area
of taxation. By finding agreement on the Dispute Resolution
Mechanism Directive, for example, Malta contributed to building
a robust and competitive EU tax system. Malta views the
Directive as playing an important role in strengthening tax
certainty and improving the business environment in Europe.
This aspect of tax certainty was also a topic for discussion
amongst finance ministers at the informal ECOFIN held in
Valletta in April 2017."
There were a number of tax matters that the Maltese
presidency was unable to conclude, however. Looking ahead,
Scicluna says there are many opportunities for the EU, but
these will not materialise unless there is a collective drive
towards change.
"There is no doubt that the main issue at stake is profit
shifting. The CCCTB is an ingenious method to ignore the ways
in which profits are shifted and their respective
counter-measures, and short-circuit this by consolidating
corporations' profits and apportioning them by country through
some agreed formula. The fly in the ointment is: which formulae
will the countries be ready to accept? One which gives more
weight to capital, or labour, or research?"
"The countries which see themselves at the losing end of
this proposal have two lines of defence. The first is that they
may disagree with the artificial formulae of apportionment. The
second concerns the fact that while all European proposals are
riding on the OECD BEPS recommendations, this one is not. There
is no CCCTB in BEPS. For this reason I see greater resistance
to its introduction."
On digital taxation, Scicluna believes wider European and
global cooperation is crucial. Another important aspect of
taxation that needs to remain high on the ECOFIN agenda, he
says, relates to third countries. "This is particularly
important in the context of the rise of Asia, the US and now
Brexit. The EU needs to take greater account of the third
country dimension. The EU is always at the forefront of global
tax efforts, but unless our partners also follow suit we risk
undermining the global tax system, which would be to our
disadvantage. Tax avoidance and evasion are global phenomena,
and should be tackled through global coordinated action. The
third country dimension is essentially about ensuring a level
playing field across the globe."
Malta's ambitious agenda during is six-month presidency set
the tone for EU-wide changes for succeeding EU Council
presidencies. This progress has been seen during Estonia's
leadership and may be further enhanced by Bulgaria and Austria
in 2018.