NEWS | Wednesday, 13 February 2008

BoV, HSBC should make up for corporate tax cuts - AD

David Darmanin

Alternattiva Demokratika (AD) spokesperson for financial affairs Edward Fenech has suggested that the financing of tax reductions promised by the party should partially come from higher income tax rates applicable to the island’s two banking giants.
If elected in a coalition government AD has promised pushing for a 5% corporate tax cut costing the state an estimated €22 million. To guarantee sustainability, the Greens propose covering the cost by means of three measures, namely gradual implementation, stricter tax compliance and increased corporate tax rates for BoV and HSBC.
“A very successful tactic used in the UK is to stagger the cost endured by a tax cut over a period of five years,” Fenech told Business Today in the first of a series of interviews with exponents of the four political parties. “Sampling carried out by the Tax Compliance Unit (TCU) is bad practice,” he added. “When a crime is committed, the police chase suspects, and not a random sample of the population.”
In the same way, Edward Fenech is advocating that gathering of intelligence information by the TCU results in more effective tax collection, thus leading to absorb part of the €22 million tax reform cost.
A third suggestion made by AD is to augment corporate tax for local banking giants BoV and HSBC. Fenech claimed that since the two banks operate in a malfunctioning oligopoly, their profit margins may be unjustified and they should therefore be taxed at a 40% rate. While assuring that other duopolies in Malta should not be subject to the same treatment, Fenech admitted that “this proposal is suggested as one of the possible measures to address unfair competition, and smaller banks should not suffer from such a development. In other European countries companies that enjoy such a big market share as our two major banks will undergo an investigation to conclude whether this exaggerated profitability is sufficiently justified in terms of fairness.”

[email protected]