MGA ‘closely monitoring’ developments on 15% global minimum tax rate on big business

The Malta Gaming Authority has identified two potential drivers of change that could impact Malta’s iGaming industry: regulatory developments and corporate taxation legislation.

The two areas of interest were identified by the regulator in a H1 2022 interim report covering January to June in a section discussing the local iGaming sector’s outlook.

Despite the challenges, the regulator was generally upbeat about the state of the local iGaming industry and its future prospects, noting that Gross Value Added generated by the industry in the first half of last year amounted to €573 million, representing around eight per cent of the country’s GVA.

Basing figures on National Statistics Office data, the MGA noted that as of the end of June 2022, an estimated 10,861 persons were working with MGA-licensed companies on activities covered by the Authority’s licence.

Here, we take a look at what the MGA had to say about the two areas of interest that could impact iGaming in Malta:

Minimum Global Tax

Described as a “key driver of potential change that is closely being monitored,” the MGA noted “the possibility of a global minimum corporate tax rate of 15 per cent being introduced in the coming years for companies with a combined annual turnover of more than €750 million.”

The attention on corporate tax stems from an OECD proposal, to which Malta has signed on for despite the country’s own advantageous tax rate for foreign companies being threatened by such a move.

In the EU, months of political wrangling led the EU Council to agree to a 15 per cent minimum corporate tax on big business in December 2022 after Hungary and Poland dropped their objections.

The minimum tax rate was agreed at global level by 137 countries, and will apply to multinational enterprise groups and large-scale domestic groups in the EU, with combined financial revenues of more than €750 million a year.

EU Member states are legally obliged to implement the new rules by 31st December 2023.

The MGA, in its outlook, pointed out that implementation is “by no means certain” and confirmed that it has actively “intensified efforts, together with key stakeholders on the matter, such as the Office of the Commissioner for Revenue, in ensuring that a sustainable strategy for the gaming sector is in place, to mitigate any potential difficulties and ultimately safeguard Malta’s competitiveness as a jurisdiction.”

Regulatory Developments

Something that has been discussed for some time now is the wave of regulatory developments in key European markets and the impact on operators that serve such markets through an MGA licence. On this note, the MGA said the online gaming sector continues to be “negatively impacted”.

“Indeed, the wave of local regulation which has been sweeping key European markets is leading to a situation where the markets available to B2C operators licensed in Malta are becoming increasingly restricted within the EU/EEA.

“Furthermore, the need to comply with different regulatory frameworks in different countries is forcing companies to beef up their compliance teams, thereby putting pressure on their profit margins.”

And, while noting the continued trends towards mergers and acquisitions in the first half of 2022, that also serve to boost corporate performance and maximise business competitiveness, it affirmed the regulator’s commitment to cooperate with industry.

FATF Greylist

The MGA positively noted Malta’s removal from the FATF grey list, which took place in June 2022, and the restoring of the country’s credibility.

“Overall, the future of the gaming landscape in Malta remains positive. Industry players are to remain vigilant in the context of the impending economic slowdown, any uncertainties stemming from regulatory developments and the trends that will characterise the future of gaming and entertainment.

“Nevertheless, the gaming industry is expected to continue to play a fundamental role in Malta, backed by a sound and robust regulatory framework and an economic environment which provides for the required human resources and operational infrastructures.”