This is the first major step the Maltese government intends to take to be removed from the “gray list” of the Financial Action Task Force (FATF) based in Paris. The FATF put Malta on a watchlist for financial crime in June. The Maltese Prime Minister Robert Abela described the decision as “unjust”.
According to sources quoted by the Times of Malta, the government in Valletta has now commissioned a national team of experts to develop a plan to reform corporate taxation. The investigation possibilities of the police unit for financial crime are to be expanded.
According to reports, the reform will primarily focus on the practice of refunding a large portion of corporate taxes to foreign companies based in Malta. The normal tax rate on the profits of Maltese companies is 35 percent, but an automatic refund is available to foreign companies, which lowers the effective tax rate to 5 percent. According to the newspaper, the criteria for receiving the refund are to be tightened and the duration of the tax break, the main driver of the Maltese economic boom in the past ten years, is to be shortened to one year.
To minimize the damage caused by Malta’s inclusion on the FATF gray list of those at risk for money laundering and terrorist financing, Robert Abela’s government has signed an agreement that includes a number of reforms. For Malta, inclusion on the gray list means that the EU country is increasingly monitored by the FATF and must present a plan of action on how it intends to remedy the deficiencies in the context of financial crime.
