MALTA’S GAMBLING FORTRESS MUST FALL: STOP THE TAX DODGE

By Economist

There is nothing admirable about Malta’s resistance to tougher European action on online gambling taxation. It is not principled federalism. It is obstruction dressed up as sovereignty. Brussels should stop treating that obstruction as untouchable. The EU has legal weapons. It should use them.

The first is enforcement. The Commission has already opened infringement proceedings against Malta over legislation that shields Maltese-licensed gambling companies from foreign judgments. The Commission says the law undermines mutual trust and EU rules on the recognition and enforcement of judgments. That should be the beginning, not the end.

Every aspect of Malta’s gambling regime that potentially conflicts with EU law deserves forensic scrutiny. The Commission should examine discrimination, barriers to cross-border enforcement, consumer protection, competition distortions and any tax arrangements that create an artificial advantage for operators concentrated on the island. Where there is a breach, Brussels should prosecute it relentlessly.

Second, the Commission and Member States should stop assuming that every tax initiative requires Malta’s consent. Many EU tax measures do require unanimity. But not every measure touching taxation does. VAT harmonisation, for example, has a specific Treaty framework under Article 113. The Union should use every legally available competence rather than voluntarily handing Malta a veto over matters that fall outside the scope of unanimity.

Third, coordinated national action can make obstruction far less valuable. Member States can tighten reporting, information exchange, anti-avoidance rules and enforcement against gambling activity directed at their residents. They can ensure that taxation follows genuine economic activity rather than merely the location of a licence.

Fourth, Brussels should investigate whether particular Maltese tax advantages amount to selective economic support. State-aid rules exist precisely because national measures can distort competition. They should be applied rigorously where the legal tests are satisfied.

Fifth, national courts should be encouraged to use EU law aggressively. The Court of Justice has made clear that direct taxation remains primarily a Member State competence, but national tax powers must still comply with EU law.

Most importantly, Brussels should destroy the myth that a Maltese licence is a European passport. The Court of Justice has recently reaffirmed that the country-of-origin principle does not apply to online gambling. Other Member States may, in principle, apply their own gambling rules to operators serving their consumers from Malta.

That matters enormously. If Malta wants to defend its gambling model, it can do so politically. But it should not expect the rest of Europe to subsidise the consequences of that model by accepting regulatory arbitrage indefinitely.

The EU should litigate. It should investigate. It should coordinate. It should legislate wherever the Treaties permit qualified-majority voting. It should use infringement proceedings and, where appropriate, competition and State-aid law.

Malta has every right to argue its case. It does not have a divine right to win. A Union of 27 cannot function if one small government can turn a legitimate national interest into a permanent European veto. Brussels should stop politely asking Malta to move. It should start using the law to make obstruction increasingly costly, increasingly isolated and ultimately unsustainable.