SBC News Malta monitors Franco-German 'EU digital taxation framework' proposal

Malta monitors Franco-German ‘EU digital taxation framework’ proposal

Industry stakeholders are monitoring the European Union’s potential proposal to introduce a ‘digital taxation framework’, aimed at consolidating taxes for digital enterprises with multi-national operations and commercial services.

The new scheme is being spearheaded by the governments of Germany and France and aims to crack down on tax avoidance loopholes, which have been perceived to be used by multi-national tech firms such as Amazon, Google and Apple.

However, a unified digital tax regime could hold severe impacts for Malta, an EU member state which has built a tech economy utilising low corporate tax rates.

The island of Malta (population 500,000) has become the leading operational hub for a number of international betting operators, drawn to operating digital enterprises’ out of Malta due to low corporate taxes, strong infrastructure and the Maltese government’s favourable position on online gambling services.

In 2017, the Maltese government reported that its online gambling sector contributed €1.2 billion of GDP (total Malta GDP – €11 billion), employing a +6000 workforce.

At present little is known of the Franco-German digital tax initiative, nevertheless, EU insiders strongly believe that any significant tax change proposals will be protested by the member states of Ireland, Malta and Luxembourg, who will contest the proposed regime as a Union overreach.

The EU can only advise member states on fiscal and corporate tax charges, however, EU-wide tax reforms require a unanimous agreement from all member states to adhere to.

For a number of years, corporate tax avoidance has been a contentious topic for the European Community. Numerous European MPs have accused member states such as Ireland, Malta and Luxembourg of purposely inviting corporate tax avoidance through exemptions on declaring revenues and profits.

Furthermore, in 2017 the EU has set out to toughen its anti-money laundering code, implementing the community-wide ‘Fourth Anti-Money Laundering Directive’ (June 2017).

Taking a tougher approach on money laundering, EU officials have criticised the Maltese government of falling behind on standards related to monitoring financial transactions.

Malta officials have defended the nations policies and track record, stating that the country has proven to be an exemplary authority in regulating ‘high risk industries’ such as online gambling.

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