Corporate tax in the EU, a way to compete

An OECD study from 2008 found that corporate income taxes are the most harmful form of taxation for economic growth. Countries with a lower corporate income tax are likely to grow faster and attract more investment and jobs than high-tax countries.

A pic of OECD

Corporate tax is an area where a single country cannot play the monopolist role as a supplier, as an individual you can do the same for yourself and your assets moving and locating to find the best government suppliers as the business do, because the tax competition amongst the jurisdictions is very healthy for a better world and because the borders are just a limit only in your mind
Average top corporate tax rates continue to fall across the world, and the recent change to the corporate taxes in the United States is a continuation of that trend. Several countries are planning to reduce their corporate tax rates in the coming years. Today, the United States’ statutory corporate tax rate is closer to the middle of the distribution and closer to the worldwide average. Countries considering cutting their corporate tax rates could look to potential benefits of attracting business investment and a more competitive tax environment.

A pic of EUROPE

In fact at a global level and not just in EU, being the move of business, capital and corporations easy to be implemented and fully free inside the EU, the Corporate tax is one of the taxes that had shrunk down in the last 30 years, because the competition amongst countries to perform in attracting investment and business has a key point in the level of taxation and related services

A pic of MALTA (EU)

CORPORATE TAX SYSTEM MALTA, lowering the real Corporate Tax to 5% from the nominal one of 35%, the smart and fair solutions of

Full Imputation System and

NID model or notional interest deduction

applied in Malta (EU), a model for the next step for the OECD countries

In the pic below you can figure out the unequal Tax Treatment applied in USA for Equity Financing and Debt Financing (… and the same in many others developed countries).

To address a proper solution instead, I suggest to have a look at the Maltese Corporate tax system for 2 main reasons I summarized in very few words:

First the full imputation system, where dividends distributed out of taxed profits, are carrying an imputation credit of the tax paid by the company, having de-facto a quasi-similar model to the US passthrough firms instead of C corporations model

Secondly, but more relevant to the bias of “advantageous debt financing model” Malta has introduced for the fiscal year 2018 a NID model or notional interest deduction, giving a tax neutrality to the equity financing and debt financing
NID is calculated as the risk-free rate referred to the current yield to maturity on Malta government stocks with a remaining term of approximately 20 years, plus a 5% premium

A wrap-up

As EU citizen, to me is a big loss if I couldn’t have the opportunity to make my choice, the EU club will be less competitive with the rest of the world and offering less freedom to his citizens and corporations, and when a state is building up barriers instead of filling any ditch is because he wants to be a monopolist offering his services to the community…very bad indeed

www.maltaway.com no borders international advisory partners your hub for a re-location in Malta and the world for business, assets and people

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