Malta shows reluctance to align with Energy Taxation Directive

Economy minister says move would hurt revenues

(source: Unsplash/Shaah Shahidh)

Malta’s economy minister Edward Scicluna has demonstrated reluctance about the island nation aligning with the Energy Taxation Directive, as the minister said removing tax exemptions on aviation and shipping fuels could hurt Malta, as well as other EU member states.

“While Malta is aware that the Energy Taxation Directive needs to be updated to reflect present day realities, and to help promote the use of renewable and clean energy sources, the removal of tax exemptions on aviation and shipping fuels will have serious repercussions on many member states, including Malta, unless tackled internationally,” said Minister for Finance Edward Scicluna during the Informal ECOFIN meeting held in Helsinki, Finland on 13-14 September, according to the government’s Department of Information (DOI).

“Ships will bunker tax-free outside the EU waters while new aviation taxes would hamper connectivity of peripheral regions,” the minister added.

Current EU rules for taxing energy products and electricity are recorded in the Energy Tax Directive 2003/96/EC. The Energy Taxation Directive establishes the minimum excise duty rates that EU member states must apply to energy products for fuel and transport and electricity, according to the official website of the European Commission.

“EU legislation only sets harmonised minimum rates. Member states are free to apply excise duty rates above these minima, according to their own national needs,” the EC writes on the subpage carrying details on the ETD.

Should all EU members align with the ETD, tax exemption would be removed from the area of the European Union. Pundits expect this would result in countries in the bloc losing revenues from bunkering and refuelling, as operators would likely manage such activities in a tax exemption zone before entering the area of the European Union.

Countering hybrid threats

During the informal meeting, attending ministers also debated the resilience of financial market infrastructure and the role of the financial sector in countering hybrid threats, the next steps needed by the European Union to enhance the Capital Markets Union (CMU) as well as the European Fiscal Rules, according to the press statement published on the official website of the DOI.

Minister Scicluna said that there are elements of the fiscal framework which need to be reviewed — including the overreliance on unobservable indicators such as the output gap, and the complexity of the rules. “However, changing the rules will not be enough. What is truly imperative is to ensure that the rules are observed and properly enforced. If we do not address this core issue, the framework will remain weak,” the minister added