Removal of Malta from grey list boosts investor confidence, attractiveness still far below pre-2020 levels

The attractiveness of Malta to foreign investors has improved by 21 percentage points over last year’s levels, indicating that the international business community views Malta more favourably after it was removed from the Financial Action Task Force’s (FATF) so-called grey list.

An annual survey, The EY Malta Attractiveness Index, reported that 58 per cent of companies surveyed say Malta is currently attractive for doing business.

Despite the improved figures, attractiveness still clocks in well below pre-2020 levels. According to EY’s annual survey, perceptions of attractiveness across the investor and business community reached an all time high in 2016 at 87 per cent, gradually dropping to 62 per cent in 2020, to an all time low of 37 per cent in 2021, and back to 58 per cent for this year.

In 2022, businesses identified concerns about the possible impact of developments surrounding international tax policy, as well as the ability to find workers locally.

The survey was conducted among 120 foreign investors and companies in Malta by big-four audit and consulting firm EY. The data was collected in June, just after Malta was taken off the FATF’s global list of jurisdictions under increased monitoring.

Business concerns

With regards Malta’s foreign tax rate, which allows foreign companies to pay an effective rate of five per cent thanks to a system of rebates, investors viewed this corporate tax rate as the most attractive feature for doing business in Malta at 71 per cent.

Troubling to the local economy, this tax rate was also identified as the biggest risk. Indeed, earlier this year Finance Minister Clyde Caruana had revealed a planned overhaul for the entire corporate tax regime to move away from the current imputation system. One month ago, however, the minister shelved the plans, saying Malta “will not jump the gun” given that the international appetite for setting a minimum corporate tax rate has waned.

Despite the developments, 58 per cent of respondents identified changes in international tax rates as the biggest risk to Malta’s attractiveness over the next three years.

“Survey respondents are clearly aware of the risks of this changing. If our biggest pull factor is potentially coming to an end, what is our attractiveness offer going to be in a new global tax environment? We have a great social climate and telecommunications infrastructure, but is it going to be enough?” EY Malta Country Managing Partner Ronald Attard said while addressing the conference on Tuesday morning.

Next in line for business concerns is the skills shortage, at 54 per cent, and which consistently ranks as a top concern each year, followed by banking challenges which 38 per cent of respondents identified as a concern.

Coming in close in fourth and fifth position are cost competitiveness and reputational concerns respectively, each at 36 per cent.

Looking ahead

Despite the several challenges and concerns identified by companies surveyed, a majority, at 69 per cent, said their long-term future is in Malta. Furthermore, almost half of respondents have some form of expansion plans in the works for 2023.