The European Commission (EC) has called on Malta to ensure the “effective supervision” of internationally-oriented business by financial institutions, in cooperation with the host supervisors in the countries where they operate.
Malta’s supervision of internationally-oriented business is “challenging,” according to the commission in its 2017 country-specific economic recommendation published Monday. The Mediterranean state’s financial system is characterised by a favourable tax environment that attracts a “significant number” of foreign institutions.
Hundreds of insurance insurers have a presence in the Mediterranean state. View the Malta Financias Services Authority’s list
here.
The commission said Malta is the only EU member state utilising the full imputation system of company taxation and a refundable tax credit scheme. There is also an “extensive” network of double taxation treaties, and “attractive” tax residency status for individuals.”
“The financial sector carries out most of its activities outside Malta. The ability of a relatively small supervisory authority to oversee a large system, in particular in the insurance sector but also in banking, is under pressure.”
In recent days, Malta’s financial system has come under scrutiny after a network of journalists reported that the country works as a “pirate base” for tax avoidance inside the EU.
“Although profiting from the advantages of EU membership, Malta also welcomes large companies and wealthy private clients who try to dodge taxes in their home countries,” according to the “Malta Files” report of European Investigative Collaborations. The network said it dug into hundreds of thousands of documents “that show how Malta operates a tax system where companies pay the lowest tax on profits in the EU.”
In a press conference, Malta Prime Minister Joseph Muscat said Malta is being “attacked” over its taxation policies. “[N]obody is saying Malta is breaching EU directives or that there is any wrongdoing. We have a competitive edge,” he said as quoted by Malta Today. “What’s wrong with that? …Our register is more transparent than Germany’s or Luxembourg’s, and we don’t give tax rulings like Ireland gave to Apple. Our competitive edge is similar to giving a manufacturing company land on the cheap to encourage it to set up a factory in our country.”
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