Address by the Hon. Tonio Fenech, Minister of Finance

ADDRESS BY THE HON. TONIO FENECH, MINISTER OF FINANCE, THE ECONOMY AND INVESTMENT, ON THE SIGNING OF THE TEXT OF THE DOUBLE TAXATION TREATY WITH THE U.S.A. – AUBERGE DE CASTILLE, VALLETTA – 8TH AUGUST 2008

Your Excellency, Distinguished Guests, Ladies and Gentlemen, Good morning.

It is our pleasure to announce that we have taken another important step in the process leading to a Double Taxation Treaty between Malta and the United States of America.

After I initialled the text of the Treaty last March with Michael Mundaca from the US Treasury, work has continued in earnest and today we are signing the agreement. This will now go before the US Senate for ratification before coming into force. It will also be published by both the US Treasury and the Government of Malta to become a public document prior to ratification.

I would like to take this opportunity to thank the US Treasury, especially the team lead by Michael Mundaca, for making this treaty a reality. This is truly a momentous event for Malta which we cherish.

A Treaty for the Avoidance of Double Taxation with the US is of significant importance to Malta for a number of reasons.

Cross border trade, commerce and investment can only foster and grow if businesses are allowed to transact with a degree of certainty, double tax treaties are economic instruments that benefit individuals and corporate entities, as well as of the partner states involved.

Double Taxation treaties have played an integral role in the development of Malta’s economy since it became independent. These international agreements have allowed tax issues with partner countries to be clarified, international double taxation to be avoided, and fiscal evasion to be curtailed. In the local context, they have helped Malta develop trade relations with other countries, assisted the flow of inward direct investment and served as an important platform for Maltese residents doing business in partner countries.

Double tax treaties have thus become a vital tool in Malta’s drive to increase the level of cross- border business not just in the export of goods but also in services and capital movement, which are good growth areas for Malta.

The addition of the US, one of the world’s major economic players, to our comprehensive network of double taxation agreements was therefore inevitable.

This treaty is a historic accord in its own right. In 2007 we finalised our discussions for a new business taxation regime with the European Commission. This was accepted to certify, so to speak, the international acceptance of our business tax regime with international norms and requirements. This regime included various anti-abuse measures that were further strengthened in 2007 and 2008 by improving our legislation for better information exchange with tax authorities internationally to avoid tax fraud and similar crimes. We have seen the immediate effect of this as various large investors have honoured us with investments in Malta as their own tax authorities signalled their acceptance of Malta as a financial jurisdiction of repute.

This treaty with the USA furthers this recognition internationally. This double taxation agreement symbolises the good relationship Malta has with the US, regularises the investment channel and manifests the perception that Malta is acceptable as a place to do business. The USA and Malta

already have well established information exchange links through international networks and bodies combating tax fraud, terrorist financing and other forms of criminal activity.

The significance of this treaty therefore extends beyond the tax implications to improve Malta’s competitive and marketing position so that it is perceived to be clean, above board and accepted by our counterparts internationally, including the USA. We will maintain this reputation and will work with our counterparts in the USA to ensure the long term commitment to our reputation and to maintain the trust and confidence we have strived to win.

Malta’s economy has made significant strides forward in recent years with good GDP growth, the fulfilment of the Maastricht economic convergence criteria and adoption of the euro as our national currency. In the past two years alone, we have also managed to attract over US $3 billion worth of high quality FDI to our shores.

We already enjoy good economic relations with the US where we have experienced a favourable balance of trade in recent years. Exports to the US last year amounted to over €246 million. We believe that this treaty will act as a catalyst to increase trade between our countries even more. The indications are already good and we will work to continue facilitating this at different levels, even beyond fiscal frameworks.

The presence of international financial and business advisory institutions in Malta are contributing to enhancing relations with the US and facilitating increased economic activity. It is our intention to continue supporting them through our legislative and regulatory framework. The initiatives undertaken and marketing efforts of Malta Enterprise and FinanceMalta to promote Malta as an attractive location for business are to be commended.

The treaty in itself is quite unique, as there are provisions that also apply to significant Maltese communities living in other countries in particular those in the EU and Australia, so that these too may benefit from the tax provisions incentivising investment. This is an interesting development where, whilst strict anti abuse provisions to stop treaty shopping were drafted into the treaty, the US Treasury still understood the need for international trade and investment in Malta with key countries where there is a significant Maltese migrant population. This will ensure that the treaty is used for the benefit of Malta and Maltese communities abroad. Again, I must thank the Treasury for their understanding here and their grasp of the realities and economics of even a small country like Malta.

Arriving at this stage was not an easy task. I would, therefore, like to congratulate the Commissioner for Inland Revenue and our Tax Treaty Negotiating Team, the Malta Financial Services Authority, the Malta Maritime Authority, the Financial Intelligence Analysis Unit, and Ambassador Mark Miceli and his excellent staff for all their efforts and commitment to finalise this agreement. Last but not least, I thank our industry leaders for their support and assistance throughout the process.

My special thanks and appreciation go to Ambassador Bordonaro and her embassy people who have been very supportive of the negotiation process and instrumental in facilitating communication between Malta and the United States. Of course, I must also mention the continued support of AmCham and the US investor community in Malta as well as the practitioners who have supported us and consulted with us throughout the process.

I auger that this historic double taxation agreement will further strengthen relations with the US, stimulate economic activity and bring our nations closer together for the mutual benefit of Maltese and US citizens alike. Thank you.

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