BEPS and the digital economy : a Maltese perspective

Abstract

Purpose: The purpose of the study was to evaluate what the possible changes in Action 1 and Action 6 of the OECD BEPS Action Plan could result in, and how such changes could potentially affect Malta negatively, due to the affects which such actions may have on Malta's gaming sector. The main aim was to consider whether such actions would affect the corporate tax charged to those gaming companies, and if this may result in the gaming companies being driven away from Malta. Design: The purpose of the study, was to be achieved through a set of interviews targeting both local tax practitioners who are experts in the field of BEPS, the Tax Regulatory Authority, and also gaming companies who have set up shop in Malta. Findings: The actions presented within the action plan (with special reference to action 1 and 7), will take place in some form or another, however probably not within the time frame that has been set out by the OECD. Also, what the exact changes in the OECD Tax Treaty Model will be is still to be revealed, hence the behaviour of the gaming sector in Malta will be dependent upon such changes. However, from the data identified, if the phenomenon of a 'digital PE' (as described in the dissertation), as well as changes within the OECD Model Tax Convention do take place, in favour of the source countries, then smaller companies operating within Malta with motives other than those of trading, are likely to leave the country. On the other hand, companies which have grown a great deal within Malta, and are actually here for legitimate trading reasons are likely to stay however, this is dependent upon the circumstances of each company. Conclusions: It is doubtful whether all fifteen action plans will be implemented exactly as has been stated within the OECD BEPS Action Plan itself. They will definitely have some form of affect on a number of countries, however perhaps not ii to the extent that is portrayed within the actions. Many large gaming companies have actually set up base in Malta and are no longer here due to the taxation system benefits that Malta offers foreign companies. This is definitely one of the main reasons for their presence here, however it is important to note that it is not the only one. Implications: The study suggests that Malta should be prepared for any possible changes made regarding the topic, by the OECD; that Malta should provide more incentives for gaming companies to remain in the country; and the Maltese Government should promote and market Malta to a larger extent, incentives should be given to foreign companies located in Malta to further their growth.