Rising skepticism of the gambling sector, also referred to as online gaming by government officials, did little to deter operators in recent years. But a new EU-wide digital taxation scheme, spearheaded by France and Germany, now threatens to tax all digital companies on their turnover or profits. <\/p>\n
The tax proposals may intend to take aim at big American giants like Apple, Facebook and Google, but anynew measures could inevitably affect other digital firms, such as the online gambling companies thriving in Malta.<\/p>\n
The extent of the rules is still not clear \u2014 the European Commission is only expected to release its proposal in the spring and France seems to have dialed down its enthusiasm<\/a>. But the political push to tax digital firms could be bad news for the island, which has grown dependent on the gamingsector\u2019s success. Online gambling<\/a> makes up almost an eighth of the tiny country\u2019s economy<\/a>and is one of the largest sectors, along with finance and tourism. Malta \u2014 population of over 430,000 \u2014 has few natural resources to speak of.<\/p>\n \u201cPossible international corporate taxation reforms may affect Malta\u2019s fiscal position unfavorably due to the high share of corporate tax revenues in total revenues,\u201d a recent evaluation from the International Monetary Fund said. <\/p>\n Along with countries like Luxembourg and Ireland, the Maltese government is scrambling to obstruct the Franco-German initiative and will make a case for pursuing global tax reforms via the Organization for Economic Cooperation and Development [OECD], which wants to set global, not just European, taxation standards for digital giants. <\/p>\n Because EU decisions on tax reforms require full, unanimous agreement from all member countries, Malta has the power to stall potential reforms for months. But whether this will save Malta from broader EU oversight \u2014 and rising criticism against its digital gambling sector \u2014 is far from clear.<\/p>\n \u201cMalta has a general problem with money laundering and tax evasion,\u201d said Markus Ferber, a German European People\u2019s Party MEP and vice chair of the European Parliament\u2019s Economic and Monetary Affairs Committee. \u201cFor me, it is very clear that the Maltese government has to significantly step up their game.\u201d<\/p>\n The Commission can launch infringement procedures if Malta isn\u2019t complying with EU rules. That could target money laundering and Malta\u2019s corporate tax exemptions and rules, especially if they favor one company or type of company.<\/p>\n The Commission prepared a recent analysis of Malta\u2019s compliance with anti-money laundering rules and flagging potential areas of improvement. The recent murder of journalist Daphne Caruana Galizia<\/a>, who was investigating corruption and money laundering, also led to calls for a closer look at Malta.<\/p>\n Malta is working to attract more tech interests, such as video game operators,venture capital money and startup investment,in a move some see as an attempt to diversify its economy.<\/p>\n<\/blockquote>\n \u201cMalta needs to show to Europe and indeed the world that its rules and regulations are healthy and robust,\u201d European Commission First Vice President Frans Timmermans said<\/a> earlier this month.<\/p>\n With ongoing European Parliament investigations into Maltese politicians\u2019 involvements in the Panama Papers scandals and tougher EU-wide scrutiny on sectors like online gambling, European authorities aren\u2019t expected to let up anytime soon.<\/p>\n V\u011bra Jourov\u00e1, Europe\u2019s commissioner for justice, put it simply: \u201cI will focus on Malta.\u201d<\/p>\n Malta\u2019s gambling industry has been a key driver of its economic growth in the past decade.<\/p>\n When the country joined the bloc in 2004, it had an economy funded largely by tourism, with little or no tech industry to speak of. Online gambling was still a relatively new concept in Europe.<\/p>\n V\u011bra Jourov\u00e1, European commissioner for justice, has her sights set on Malta | Julien Warnand\/EPA<\/p>\n The small country saw an opportunity to capitalize on a gap in the market and became one of the first to craft clear rules for the sector that encouraged growth. Its new EU membership helped, giving it access to millions of additional consumers \u2014 as did the tax incentives it used to lure companies to set up shop on the island.<\/p>\n Online gamblingcompanies from Sweden and France \u2014 looking to escape relatively restrictive tax regimes in their own countries \u2014 flocked to the country. Many international gamblingoperators based in Malta effectively pay around 5 percent in corporate tax<\/a>.<\/p>\n \u201cIt\u2019s very inexpensive here,\u201d said Val\u00e9ry Bollier, the French owner of OulalaGames<\/a>, which operates in Malta. \u201cWhen we made a business plan and we calculated our break-even point here in Malta, we said, \u2018Where would our break-even point have been in France?\u2019 It would be way higher.\u201d<\/p>\n The industry flourished with little scrutiny until the 2010s, when transparency advocates and regulators began to raise concerns about the online gambling sector, which they found was particularly prone to money laundering, among other issues. Portugal<\/a> was scrutinized for sports betting, the Czech Republic<\/a> for allowing unlicensed operators and Gibraltar<\/a> for its lax tax structures. <\/p>\n \u201cWith the level of anonymity and lack of face-to-face interaction that the online world provides it\u2019s hard for law enforcement and others to see where the money is coming from and where it is going to,\u201d said Laure Brillaud, a policy officer at Transparency International.<\/p>\n In recent years<\/a>, Italian authorities discovered the mafia was filtering money through Malta-based online gambling companies. Earlier this year<\/a>, a whistleblower from the Malta Gaming Authority (MGA), the national regulator for online gambling, said the agency was doing a poor job overseeing the sector.<\/p>\n The Maltese government always used the authority to prove how well it regulated the \u201chigh-risk\u201d industry. The allegations severely damaged the body\u2019s independence, casting doubt over its watchdog function. Local media speculated that some of the country\u2019s biggest gamblingoperators, like Swedish firm Betsson, were preparing to decamp.<\/p>\n The noise caught the attention of critics in Brussels, for whom Malta became a target of intense attention. \u201cMalta has been put on a screen \u2026 having an address there now looks more dodgy,\u201d Sven Giegold, a German Green MEP and member of the Economic and Monetary Affairs Committee, said.<\/p>\n Malta won\u2019t give up its lucrative gambling revenue without a fight.<\/p>\n The government\u2019s parliamentary secretary for digital<\/a>, Silvio Schembri, appointed this year after national elections, is set to lead the battle. As the former chairman of the Responsible Gaming Foundation<\/a>, a group that advocates for safe gambling that worked closely with the industry and was started with the support of the Malta Gaming Authority, Schembri is seen as someone close to the industry who can leverage its profits even further. He is also expected to convince EU officials that Malta\u2019s online gamingindustry is squeaky clean, transparent and in full compliance with rules. <\/p>\n Malta sees e-sports as a potential way of diversifying its economy | Kazuhiro Nogi\/AFP via Getty Images<\/p>\n The government insists it is on track to fully implementing EU-wide rules to combat money laundering, despite being slapped on the wrist by the European Commission this past summer over the failure to apply the latest updates on time.<\/p>\n Maltese officials also brush off tax haven accusations and EU calls for reforming its tax system \u2014 including its digital tax scheme \u2014 that would force companies to pay more. <\/p>\n \u201cWe\u2019ve introduced such a number of anti-tax avoidance legislation \u2026 the public and the media are not aware of them \u2026 so we\u2019re still depicting the past,\u201d Malta\u2019s Finance Minister Edward Scicluna said earlier this year<\/a>. He also strongly denied accusations that Malta was trying to slow down or stop discussions on broader EU tax reforms.<\/p>\n Maltese officials insist that an update to international OECD rules will be more effective because that would set a global standard that is easier to follow \u2014 and enforce. But industry insiders presume the government is simply stalling in an effort to maintain the system it has in place. And Malta<\/a> seems to be getting its way, at least in part. A new draft Council document obtained by POLITICO shows broad indecision on whether the EU should wait for international guidelines or rush ahead with its own.<\/p>\n \u201cThe information technology sector in Malta is also growing fast, but not as fast as the gambling sector\u201d \u2014 Carm Cachia from the eSkills Malta Foundation<\/em><\/p>\n<\/blockquote>\n Gambling companies aren\u2019t complaining. A spokesperson for Betsson<\/a> said the company would continue hiring and growing its business in the country, countering talk that the Swedish online gambling operator was thinking of uprooting its close to 1,000 employees in Malta.<\/p>\n Malta is working to attract more tech interests, such as video game operators,venture capital money and startup investment,in a move some see as an attempt to diversify its economy. <\/p>\n \u201cThe same way Malta established itself as a reputable leader in the gaming sector, there should be no reasonable doubt that Malta is well placed to do the same in video games, e-sports and fantasy sports among other sectors,\u201d Maltese Digital Secretary Schembri said. <\/p>\n That doesn\u2019t mean a transformation of thegambling sector, which keeps pumping cash into the economy.<\/p>\n \u201cThe information technology sector in Malta is also growing fast,\u201d said Carm Cachia from the eSkills Malta Foundation, a coalition of representatives from government, industry and education that aims to boost digital skills, \u201cbut not as fast as the gambling sector.\u201d <\/p>\n Bjarke Smith-Meyer contributed reporting. <\/em><\/p>\n Original Article<\/a><\/p>\n [contf] [contfnew] For over a decade, low corporate tax rates made the tiny Med..<\/p>\n","protected":false},"author":1,"featured_media":23484,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[50],"tags":[],"class_list":["post-23483","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-tech"],"yoast_head":"\n\n
Under scrutiny<\/h3>\n
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<\/p>\nNot giving in<\/h3>\n
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