The connecting factors for the taxation in Malta of the income or gains of a body of persons : contemporary challenges and threats

Abstract

In an attempt to strike a balance between fact and theory, one could say that we have literally split this study in two. After a brief introduction in which we outline the theoretical justifications used by States to attain taxing rights over persons and income and subsequently establish the connecting factors which are typically employed to accomplish this, we embark on a long and thorough analysis of the way in which these notions are actually incorporated in the Maltese tax system at present. After attaining a solid understanding of the Maltese system we briefly venture into two important aspects of the international arena to attain a more three-dimensional appreciation of how these concepts, despite remaining at the heart of every tax system, have been molded into a variety of forms, at times almost indistinguishable from each other, to accommodate each jurisdiction's individual necessities. We do this by first highlighting some note-worthy differences between our system and a number of foreign tax systems and then, by comparatively analyzing the related aspects of the OECD Model Convention. This marks the turning point, as once we are done making comparisons we adopt a very different approach in trying to capture the essence of why the current systems employed by States to assert taxing rights have been seemingly plagued by certain aspects of the modern, globalised climate in which they function. These factors which have heated up the worlds of trade, finance and investment and effectively dissolved many of the barriers which previously held domestic markets intact have seemingly brought tax authorities to their knees as their battle to collect the State's dues becomes increasingly more challenging. We conclude the study by presenting what we hope to be a fairly accurate explanation of what is causing the deficiencies outlined in the previous chapter. We then summarise what we consider to be the most effective methods adopted by States to combat these deficiencies, and attempt to round-up our arguments by suggesting potential alternatives to the systems currently adopted. A point worth noting in relation to these last sections, regards the sources upon which the principal ideas are based. Despite there being a handful of very prominent authors who have voiced their concern and formulated an opinion on many of the questions in discussion, these debates have been entirely restricted to the academic forum, with no hint of attention, much less apprehension, from the decision-takers, from outside these circles. As a result of this, we must admit from the start that most of the content of the concluding sections of this study consist mainly of the opinion of the author and many of the technical observations In these sections are similarly based on the opinions of academics and not on facts which have been confirmed through practical application.