Malta and other International Financial Centres are seeking a global tax deferral till 2025
In October 2021, a deal between almost 140 nations, facilitated by the Organization for Economic Cooperation and Development (OECD), had been signed aimed to endure that large corporations (multinationals) pay a minimum tax rate of 15% and make it more difficult for them to escape taxation. The countries supporting this new global tax minimum account for over 90% of the global economy. According to the OECD, the first pillar of the twin-pronged reforms will reallocate more than €110 billion corporate profits from approximately 100 of the world's largest and most profitable companies.
Malta now wants the OECD’s ambitious worldwide 15% minimum tax rate set to be implemented by January 2023 to be postponed by January 2025, i.e. receiving an extension for two years.
Despite the fact that Malta has already agreed to OECDs plan nonetheless is lobbying to achieve an extension of its implementation. Malta is keen to extend this deadline as 20 of the largest foreign companies situated on the island, which employ thousands of people, will be heavily affected by such a development. The tax burden on said companies will triple and high-ranking sources argue that several of these companies have implied that they would contemplate closing down their local operations if this occurs.
Additionally, according to government sources on the island, negotiations are also being undertaken to keep foreign investors in Malta once the tax regime changes. Malta is seeking to achieve the two-year extension so as to make the necessary reforms in order to be able and still remain attractive to large multinationals. It seems that January 2023 will be greatly damaging to Malta’s economy and reputation as an international financial centre. The extension is also sought by other IFCs as they find themselves in similar position with the Mediterranean island.
The results of the bid for extension remain to be seen.
BY fLEXI tEAM