An experienced team of “number crunchers” from a global financial agency are to advise the government on how to clamp down on tax dodgers, Finance Minister Clyde Caruana announced on Thursday.

Speaking during Finance Malta’s annual conference, Caruana said technocrats from the International Monetary Fund will be advising the government on how to recoup more tax through better tax compliance mechanisms.

Caruana highlighted how only 30% of Maltese businesses claim to make a taxable profit, with the other 70% declaring losses or break-even situations.

The finance minister said the government cannot push ahead with tax reforms without first ensuring that these reforms will not harm government finances, which can be done by recouping more tax revenues. 

Caruana in April announced a major overhaul of the tax regime by 2025, but these plans have since been shelved given the waning appetite for global tax harmonisation. 

Malta taxes companies at a 35% rate on end-year company profits. 

However, the country attracts foreign investment by offering overseas companies a series of rebates and benefits that allows them to bring their corporate tax rate down to an effective 5%. 

The system has long attracted criticism for undercutting the tax regimes of other EU countries.

Caruana acknowledged that while immediate plans to reform this system have been put on the back burner, the reality of the need to reform a tax regime introduced 30 years ago cannot be ignored.

Malta, he added, cannot keep saying no to things.

“It is important that whatever is done is planned carefully. We have lived with the current tax regime for 30 years. Any changes need to be done properly, as we will have to live with these changes for the next two to three decades”.

He said reforms to the tax regime do not mean Malta will render itself uncompetitive.

The finance minister said that despite the waning appetite for tax harmonisation, this does not mean the European Commission will not continue with its own efforts to crack the whip on taxation.

He said the Commission is “chasing” Malta to commission certain studies when it comes to taxation of interest payments, royalties and dividends.

‘Entire generation priced out of property market’ – Metsola

European Parliament president Roberta Metsola warned that an entire generation risks being priced out of the property market.

In a recorded message played during the conference, Metsola said even young professionals were struggling to make it onto the property ladder.

She warned that the short-term approach of chasing quick profits is holding the country back.

“We can build, but build better”, Metsola said of the construction sector.

She said that with 300 days of sunshine, Malta should be a “solar giant”, yet it cannot do this if every house or office block is in danger of being thrown in the shade due to construction works.

Metsola said the sector, and the country, must build in a way that protects Malta’s culture and heritage.

The European parliament president also spoke about the need to stamp out corruption and improve the efficiency of Malta’s courts.

She said fixing the court system will help inject confidence that investors will be able to gain access to justice without having to wait decades.

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