Minimum corporate tax: ‘I have to answer to my people,’ Caruana tells EU ministers

Finance Minister Clyde Caruana told EU counterparts on Monday that he has to “answer to my people” on the issue of a global minimum corporate tax rate.

He again insisted that Malta has strong concerns about some aspects of the proposal.

The EU council of finance ministers, or ECOFIN, is currently discussing the proposal pushed by the OECD that would see the minimum corporate tax rate set at 15%.

Malta currently taxes foreign companies 5%. This tax regime has been in place since before EU accession, and was aimed at attracting foreign investment to Malta. While foreign companies initially pay 35% corporate tax like local firms, they benefit from a 6/7 tax refund scheme. 

The OECD pact states that the 15% tax rate would only apply to companies making profits of over €750 million.

Caruana had previously confirmed that Malta had agreed to sign the OECD pact, stating that all countries were being “forced” to sign, but said Malta had some reservations, particularly on the €750m threshold and excluded sectors.

Speaking in Brussels, Caruana said that, while the EU is pushing to take the process to the next level, there are a number of concerns by a small number of countries, while others want more visibility on a technical level.

Malta’s position is that the concerns which are coming up must be discussed and addressed before the voting takes place.

“Malta acknowledges the efforts done at global level in order to get this agreement in place. Throughout this OECD, process we sent our contributions and participated at our best. We said yes, however, we have mentioned that we have strong reservations on certain issues. Issues on which unfortunately we never received any feedback or answer.”

Caruana said he understands the motivation behind this effort and its implications, but said he cannot ignore certain issues, including those that revolve around fairness and the practicality in terms of implementation.

“As it was rightly pointed out earlier, this is a political process and we have to answer to our people. I have to answer to my people. We don’t wish to withdraw our support for this process at this stage, but at the same time I cannot ignore the serious concerns, which are various, on how all this will affect my country. We look forward to discuss these concerns during the upcoming work groups. Nevertheless, I believe that my brief intervention clearly explains where we stand on this matter.”

Caruana had previously said that Malta had accepted the OECD agreement because all countries were bowing their heads down to it. 

“This is because even if no other country agrees on it, countries can still tax the difference between what Malta taxes locally and that 15% elsewhere,” he had told MaltaToday.

The agreement is now being discussed at EU level so that it can be drafted into a directive.

Once it is approved, a transitory period will allow government to help companies settle into the system.