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Malta Warns Against New EU Digital Tax Proposals

by Jason Gorringe, Lowtax.net, London
19 September, 2017

Malta's Minister for Finance, Edward Scicluna, has warned fellow European finance ministers against pursuing unilateral taxation measures that may damage member state companies.

He told his counterparts at the recent ECOFIN meeting in Tallinn, Estonia, that: "Given the global aspect of digitalization of our economies, Malta suggests that any EU proposals in the area of taxation should serve as input into OECD global discussions. It is important not to let unilateral EU measures end up damaging EU companies."

EU states are currently considering what measures can be taken to tackle the tax challenges of the digital economy. As the recommendations of the OECD in its Action 1 base erosion and profit shifting (BEPS) report on the subject included only reforms already proposed by the EU, any future measures on the digital economy would go beyond that recommended by the OECD BEPS project. This has prompted concerns that EU action could result in disputes, confusion, and double taxation for businesses.

Earlier this month, the finance ministers of France, Germany, Italy, and Spain put their names to a letter proposing a new approach to the taxation of multinational digital companies in the European Union. The letter, addressed to the Estonian Presidency of the EU, calls for the introduction of a tax based on revenue, in addition to existing taxes on companies' profits, to be known as an "equalization tax."

The letter said: "We ask the EU Commission to explore EU-law-compatible options and propose any effective solutions based on the concept of establishing a so-called 'equalization tax' on the turnover generated in Europe by the digital companies. The amounts raised would aim to reflect some of what these companies should be paying in terms of corporate tax. This proposal is practical. It does not call into question the essential work on the common corporate tax base (CCTB) and consolidated common corporate income tax base (CCCTB). The Commission could decide to propose a legislative initiative accordingly. It will demonstrate our commitment to appropriately tax the companies of the digital economy in a way that reflects their genuine activity in the EU."

The letter says large companies should not be allowed to pay "minimal" taxes to EU treasuries while conducting substantial levels of business.

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