The revelations come just weeks after the country, which has a population of 430,000, took over the EU’s rotating presidency on 1 January – a stint that will last six months.
A report commissioned by Green MEPs in the European parliament, accused Malta of being a tax haven according to the EU’s own criteria.
Sven Giegold, a German Green MEP who campaigns on taxation, told British newspaper The Guardian: “The tax system in Malta is generous to say the least, with large companies routinely paying as little as 5% tax on their profits. This is completely unacceptable and raises serious questions.”
The report also said that despite Malta claiming to have the highest corporation tax in the EU – 35% – in reality an elaborate regime of tax breaks for intellectual property amounts to “aggressive tax planning”, allowing some companies to pay zero corporation tax.
Panama Papers
Last April, the Maltese prime minister, Joseph Muscat, faced calls to resign after the leaked Panama Papers showed two of his allies had offshore accounts, including health and energy minister Konrad Mizzi.
The scandal involved the leak of more than 11 million files from Panamanian law firm Mossack Fonseca which revealed how the rich and powerful around the world use offshore shell companies registered in tax havens to avoid paying tax.
Following the leak, the EU has vowed to draw up a blacklist of tax havens while more than 25 EU-member countries including Malta have signed a deal setting up a confidential beneficial ownership register, which would automatically share information on the ultimate owners of companies.
However, critics are concerned that Malta may not have the stomach to push for a crackdown on tax avoidance during its time in office.
At the end of last year, the EU announced it was considering plans which may require financial advisers to report “aggressive” tax planning schemes which help clients avoid paying tax.
S&P upgrade
Last October, Malta’s credit rating was upgraded for the first time in 20 years to A- from BBB+ by Standard & Poor’s off the back of strong economic and fiscal growth underpinned by predictions that the medium-term effects of Brexit on Malta would be contained.
