Business • February 29 2004

EU Tax, Internal Market Commissioner addresses business community
- business taxation code of conduct discussed
David Lindsay

Addressing members of the business community at the Chamber of Commerce and Enterprise this week, EU Commissioner for Tax, the Internal Market and the Customs Union Frederik Bolkestein cited Malta’s upcoming EU accession as a possible catalyst for further mergers and acquisitions amongst Maltese companies.
Bolkestein was in Malta this week as part of a series of meetings he is carrying out with the EU’s accession countries in the run up to 1 May, with the intention of ironing out any difficulties faced by accession countries in the spheres under his remit. Bolkestein was in Cyprus prior to Malta and will visit Poland next.
Asked about the competitiveness of Malta’s small and medium sized enterprises and family-run businesses within an enlarged EU context, Bolkestein said he believed Malta’s entry into what will be the world’s largest economy could lead to a surge of mergers and acquisitions in Malta, as SMEs band together to withstand foreign competition.
Bolkestein was, however, adamant that Malta’s entry into the EU should not be seen as a question of battling incoming forces, but also as one of adding great potential for taking Maltese business overseas with renewed strength through the coalescing of like-minded companies.
He added that the ‘cold wind of competition’ would naturally lead many of Malta’s businesses to modernise if they haven’t already taken such steps and that smaller Maltese companies should also find their niches within the EU market.
Bolkestein also spoke at length about the Lisbon Process, which aims to oust the United States from the top spot and make the EU the most competitive economic block by 2010. However, Bolkestein noted that instead of decreasing the US-EU gap, the gap in instead widening and said a lot remains to be done, particularly in the EU’s labour market reform, lest the EU fall further behind its rival across the Atlantic.
Bolkestein also spoke at length about the Lisbon Process, which aims to oust the United States from the top spot and make the EU the most competitive economic block by 2010. However, Bolkestein noted that instead of decreasing the US-EU gap, the gap in instead widening and said a lot remains to be done, particularly in the EU’s labour market reform, lest the EU fall further behind its rival across the Atlantic.
Bolkestein, who also held talks with Finance and Economic Affairs Minister John Dalli, said that only a few issues under his jurisdiction remain to be smoothed out prior to Malta EU accession. He also congratulated the ministry on the preparatory work carried out for Malta’s entry into the EU’s internal market.
The discussions at the Finance Ministry focused on a number of issues particularly the transposition of the Acquis concerning professional qualifications, the free movement of services and the Code of Conduct for business taxation.
It was noted that the legal framework concerning the mutual recognition of qualifications was basically in place and only minor fine-tuning is required following a scheduled technical meeting envisaged for this month. This would ensure, amongst others, that professionals and other providers of services in Malta would have their qualifications certified by a local Authority and this would give them the opportunity to pursue such activity in other Member States.
Regarding the freedoms of establishment and the provision of services, Minister Dalli reiterated Malta’s commitment in this area and that the local legislation was primarily earmarked to ensure high standards of service and to protect consumers. Moreover, it is both transparent and non-discriminatory. It was agreed that further technical discussions would be held in early March in order to clarify the remaining pending issues.
Minister Dalli emphasised that Malta has no difficulty in accepting the Code of Conduct since its business tax regime is compliant with the Code and all Maltese companies are subject to tax in the same way. However, Malta disagrees with some of the interpretations included in the Report of the Enlargement Group concerning specific Maltese tax-credit and the refund provisions as applied to shareholders of international trading and international holding companies.
Given the specific nature of Malta’s imputation system of taxation, it was agreed that further clarifications were required in order for the Commission services to fully appreciate this regime.
Also addressing the Chamber of Commerce event was Chamber President Louis Apap-Bologna, who took the opportunity to speak about and reiterated the Chamber’s stand that it is in favour of the lowest possible taxation rate allowable under the acquis communitaire.
“This,” he said, “would be conducive towards stimulating business, investment, employment creation, employment creation, economic expansion, generation of prosperity and wealth creation.
“Our chamber took up the issue with the Minister of Finance after our last budget in November for failing to take our advice to lower tax parameters in this country.
“We strongly adhere to the idea that taxation and social security matters should be decided unanimously. Countries at the lower end of the development scale must be allowed to use fiscal tools to compete for their fair share of investment.”
Apap-Bologna also cited the fact that the area of financial services had climbed to a 12 per cent contribution of Malta’s gross domestic product and that the sector’s value added per employee is rising rapidly and is well above the national average. As such, Apap-Bologna said that in future the Chamber’s financial services section is to increase in stature and will become known as an Economic Group within the Chamber’s set up. The Group’s role will be to ascertain sustainable growth for opportunities in the field, while also striving to identify lucrative niches for members within the EU’s internal market environment.