Malta wants EU to slow down drive against tax avoidance

VALLETTA (Reuters) - Malta’s presidency of the European Union said on Friday the bloc should slow down its drive against corporate tax avoidance because it might hurt Europe’s economy by increasing legal uncertainty.

Following recent revelations, such as the Panama Papers, of tax evasion and reduction by big corporations and wealthy individuals, the European Commission has made several legislative proposals to close legal loopholes but some of the most ambitious plans have yet to be approved by EU states.

In a paper to be discussed by EU finance ministers in Valletta on Friday and Saturday, Malta, which holds the rotating EU chair until July, said the proposed reforms would increase uncertainty, harming international investment and trade.

Malta and other smaller EU states with low tax regimes have repeatedly showed caution in the push for reform, fearing multinationals headquartered in their territory may leave.

The paper, seen by Reuters, said, “a certain amount of time is needed in order to properly formulate, assimilate and apply such legislation”.

It also argued that the EU should align the pace of its reforms to changes at international level to avoid losing competitiveness. Moves at global level are notoriously slow on tax matters.

But the EU commissioner for tax policies, Pierre Moscovici, told Reuters that reforms should continue at a “rapid pace”.

“EU citizens can no longer accept that multinationals don’t pay taxes or pay less than they should,” he said.

The Commission is also trying to tackle tax avoidance by increasing tax transparency, which Malta said could lead to more tax disputes and increase legal uncertainty.

Moscovici countered that. “Legal certainty will come from common rules across the EU to tackle frauds,” he said, noting that “this should not be used as a political alibi to stop our reforms”.

In the paper, Malta also called for an “enhanced” use of regulated tax rulings, which allow large companies to settle their tax bills in advance, a practice used by several multinationals to obtain sweetheart concessions in EU countries.

Among companies already sanctioned for such deals, the Commission has asked Apple AAPL.O to pay $14 billion to Ireland for tax skipped thanks to a generous deal with Dublin. AMZN.O and McDonald's MCD.N also face Commission investigation over taxes in Luxembourg, while Starbucks Corp SBUX.O has been ordered to pay up to 30 million euros ($33 million) in back-taxes to the Dutch state.

Editing by Louise Ireland