Where is all this going?

Joseph F.X Zahra's article on Newsbook

The accusation made by the larger Western countries that Luxembourg, Ireland and five other countries including Malta are operating tax regimes that transfer profits across borders and away from it being taxed in their own countries is again taking a central position in the debates on fiscal policy and economic recovery in the European Union and elsewhere.  In November this year, the European Commission requested these seven countries – Belgium, Cyprus, Ireland, Luxembourg, Malta, the Netherlands and the United Kingdom, for information about their taxation systems. All this follows reports on widespread tax avoidance in Luxembourg. This specific accusation is politically motivated to place the new President of the Commission, and former Prime Minister of Luxembourg, Jean Claude Junker under pressure from the word go.

This scrutiny of taxation systems follows the news made a few months ago on how the US and other countries are pressuring Ireland on the “Double Irish”, a tax management system which is used by large companies involving a combination of subsidiary companies to transfer profits to low or no tax jurisdictions. In London, led by the Chancellor George Osborne, a new tax rate referred to as the “Google tax” is contemplated to tax profits from economic activity that is “artificially shifted” from one country to another.

Where does all this place Malta? The country being one of those under investigation.

Without going into the merits of the present taxation regime which has been of great benefit in attracting effective economic activity – investment, employment – numbers and quality, technology advancement etc., it is worthwhile looking beyond the fiscal incentive and zoom on the inherent qualities of Malta as an investment location. All fiscal and financial incentives are in a sense “artificial” because they can be easily imposed or removed. Other incentives can be either natural in substance, or else acquired over a long period of time such as business culture or work ethic.

The proposal here therefore is to think beyond taxation advantages and asking why Malta per se can be an attractive investment proposition.  My suggestions are simple but still difficult to put into practice in a social and political environment which is still insular, provincial, polarised and inward looking. To start off with, establish one low tax rate for all business irrespective as to who owns it or where it conducts its activity – locally or abroad. Encourage rather than discriminate against business which is Maltese.  Invest more heavily in education, especially business education by attracting globally renowned business schools from the US or the UK to Malta. Open up for more universities, creating real competition to the University of Malta, while in the meantime provide the latter with a higher budget aimed at research and innovation particularly in the industries that we have been successful in attracting. Increase more frequency of flights to countries from where you expect foreign investment to be attracted – London, Frankfurt, Milan, Madrid, Copenhagen, Stockholm etc. Invest more in the teaching of languages, giving the English language again prominence of place, while encouraging students to learn two other foreign languages. Encourage more international cultural events. Re-establish a public service which is autonomous, professional and customer/public serving. Create an environment which attracts young people to take up politics in a civilised and harmonious manner, moving away from the state of politics that we are experiencing at the moment. Reinforce a civic consciousness through professional media rather than the amateur programming and productions that we are getting today. Reinforce a culture of honesty, transparency and respect by Government, politicians, businessmen, professionals, consumers and ordinary citizens for the law. Promote all this and the various success stories all over the world by engaging on a global public relations drive to place Malta on the international scene for the good reasons and not those that are questionable or bad.

Malta as an attraction because of its work ethic, civility and good sense. Shall we start all this in 2015?

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