Malta Institute Of Taxation Questions Budget Tax Proposals

by Robert Lee, Tax-News.com, London

08 January 2003

Responding earlier this week to the proposed changes to Maltese tax legislation put forward in the 2003 budget, the Malta Institute of Taxation has questioned the supposedly 'administrative' nature of many of the planned amendments, arguing that several of the measures actually represent substantial changes to the country's tax code.

'Bill 167,' the Institute commented 'introduces several provisions which go beyond 'administrative measures'. The Institute desires to review only some major innovations which are not of a merely technical character affecting a limited number of persons, but which will affect the liabilities of several (groups of) taxpayers.'

The MIT went on to express concern over several provisions advised during the Budget speech and contained within the Bill, including the lack of clarity over the definition of interest for taxation purposes, and provisions concerning the division and merger of companies, which are intended to move the country closer to EU legislation with regard to cross border transactions, but may adversely impact upon domestic mergers and divisions.

However, the proposals which appeared to give the Institute of Taxation most pause were those concerning the loosening of banking and tax confidentiality in certain areas.

'The thrust of article 18 of the Bill is rather difficult to grasp, but it appears to grant powers to the Revenue to obtain information regarding assets which were not declared for the purpose of the Investment Registration Scheme. The Commissioner is now being empowered to request information regarding the relative income arising from such undeclared assets.'

'It is not known how information regarding such assets can be obtained unless it is the intention to reverse the provisions already enacted granting confidentiality to declarations regarding the Investment Registration Scheme, and without breaking what purported to be cast iron guarantees that total secrecy would be maintained on those declarations.'

The MIT added: 'The Institute appreciates that tax evasion must be combated, but it deplores what appears to be the proposed dismantling of the practices upon which financial services in Malta have been built.'

The Institute of Taxation also queried the widening of tax information exchange procedures with foreign tax authorities, arguing that all of the Double Taxation Agreements entered into by the jurisdiction have limited the scope of information exchange to that which is obtainable by the Revenue in the normal course of its work.

'The Commissioner will now be able to ask anybody to furnish him with information specifically to pass on to foreign tax authorities under the arrangements for the exchange of information,' the Institute explained. 'It does not appear that any limits are built in to protect the secret or other confidential information which a Maltese citizen can be required to provide for the satisfaction of a foreign tax authority - and always at his cost.'

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