Malta is mulling on how to sweeten the impact on businesses, including some large gambling companies headquartered in the island country, from the upcoming tax rate hike in 2023, an article in the Times of Malta speculates.
Gambling Hub Status under Threat
The new corporate tax that will be introduced will be in line with the Organization for Economic Cooperation and Development (OECD)-approved minimum tax rate of 15% and is threatening to triple the percentage of tax corporations headquartered in the island currently pay.
In June, finance ministers of the G-7 countries reached a historical global tax agreement at the Summit in the UK as part of the Presidency of the G-7 Forum. Later, 130 countries, including Malta, sided with the proposed by OECD’s international economic stimulus body minimum tax rate, seeking to force large multinational corporations to stop looking for tax heavens.
As per the proposed timetable, Malta should draft the new corporate tax rate in law next year and the media report claimed based on unnamed sources working on the taxation plan, between 18 to 20 large multinational companies would have to start paying three times as much tax. The tax rate will only apply to businesses with more than €750 million ($852 million) in revenue annually.
Although the current rate of corporate tax in the island country is 35%, a series of rebates and benefits offered to international companies bring the effective rate to 5% and positioned Malta as a gambling hub with companies like Betsson AB, Kindred Group and Tipico already headquartered in the country, the government is wary this status may be threatened.
Still Negotiating to Soften the Blow
According to the unnamed sources utilized by the local media, the government is relying on finding another solution by negotiating “carve-outs and concessions” that would limit the exposure of the business in the country to the drastic tax rate hike.
On the subject of what the reaction of the affected companies will be, the media reported some sources claiming certain companies already indicated they would strongly consider shutting down operations in the country, while other sources stated no employer signaled an intention to leave the country if their tax exposure triples.
If companies from the gambling and entertainment industries start leaving the country, it will be the second serious blow to Malta this year, following the surrendering of FSA licenses by 24 financial services firms between July and September.
The financial operators decided to jump ship after Malta found itself on the grey list of the Financial Action Task Force (FATF), an act that damaged the country’s reputation for having questionable financial oversight and made standard operating procedures harder for the businesses headquartered in Malta operating internationally.
And while Malta is still mulling on how to soften the blow from the triple rate hike, another island country housing online gambling operators, Gibraltar, was among the first to take steps towards the impending tax rate hike implementation by introducing an interim change in the level of corporate tax to 12.5% to smooth the impact from reaching the main goal of 15% in the coming years.