Insight

Tax policies should not follow a ‘one-size-fits-all’ approach

New OECD changes to tax laws are changing the landscape for many companies across Europe. However, it does not make sense to treat Malta in the same way as countries with much larger economies such as Germany and France, ARQ Group partner Kris Baron tells MaltaProfile.

The ARQ Group is a new brand in Malta’s corporate services sector. Can you give an overview of the company, its core business segments and key markets?

ARQ Group is an integrated multidisciplinary organisation which provides bespoke solutions to various businesses operating within different industry sectors. The Group is composed of six independent yet fully integrated units, who ensure that clients receive focused yet tailor-made solutions and advice. The services provided by ARQ Group consist of Corporate, Advisory, Fiduciary, Tax, Accounting and Outsourcing of Resources. The strength of the Group lies within its structured and integrated approach in which expertise is focused on the different components that interact with one another, yet retain their independence. The units consist of specialists with experience across different industry sectors ranging from small to large and local to multi-jurisdictional entities. Our philosophy is to deliver a 360-degree service to clients. This extends beyond a transactional approach, but rather towards building long-term relationships with clients in which their interests are kept at heart.

ARQ Group is a joint venture between Capstone Group and Fenech Farrugia Fiott, what do you feel are the biggest benefits and drawbacks of this?

This joint-venture means that ARQ Group operates independently from Capstone Group and Fenech Farrugia Fiott Legal. The biggest benefits of an integration-based professional services firm such as ARQ Group is its uniqueness, and the infrastructure that is able to meet various needs. ARQ Group is complemented by having on its side an Audit, Assurance and Advisory firm in the form of Capstone Group and a law firm, Fenech Farrugia Fiott Legal.

Mergers and consolidation have become a global trend. Do you expect to see more consolidation in your sector?

Yes, in my view we are seeing and will continue to see further consolidation within our industry in view of external factors which have a direct influence on our sector. These include a tougher regulatory regime, ever increasing sophistication of compliance obligations and related costs and the international drive towards enhanced transparency that we are seeing with the introduction of the BEPS project and the automatic exchange of information which comes into force from 2017. These changes will have a direct impact on how international businesses are structured, and our industry must react to find solutions that are aligned with this thinking. The cost to invest in establishing the appropriate infrastructure, knowledge, bank and support structures are significant, and these factors shall, in my opinion, drive consolidation as well as contraction within our industry. Integration is an essential component in today’s business world, as through it clients can be prepared to meet the challenges that these regulatory changes will bring. I would expect to see several attempts towards service integration, yet effectively managing it is an entirely different issue. It is a very particular process as it requires continuous planning and improvement to master. The appropriate mind set, coupled with the necessary infrastructure and talented individuals are of quintessential importance.

Regulatory developments on EU and OECD level are set to change the game for tax planning. How do you think Malta should position itself in this regard?

Tax planning has become an increasingly topical subject. There is most certainly a drive towards tax harmonisation across the EU member states, and this may have an impact on our jurisdiction. The ‘one size fits all’ approach could be detrimental since it does not make sense to treat a country like Malta in the same way that you would treat significantly larger economies such as Germany or France for example. Malta should retain its sovereignty and discretion to develop its fiscal policy, albeit within the parameters of good governance and sound judgement while aligning itself to the principles of respected bodies such as the OECD. Malta has always looked upon the OECD for guidance and participates actively in taking this organisation forward. Ultimately, Malta is not solely about tax and there are numerous other factors which make, and which will continue to make Malta an attractive proposition for FDI.

What new trends and patterns do you believe offer growth opportunities for the ARQ Group in the coming years?

I think that our clear strategy has always been to put the client first. We have developed an infrastructure which is built around principles of expertise and compartmentalisation yet structured integration. This allows us to provide clients with specialised advice on key components of their business including corporate administration, direct and indirecttaxation, accounting, trust and fiduciary. In the periphery we can also bring to bear advisory, independent audit and assurance services as well as high calibre legal advice. We therefore feel that we are in a position where we may take advantage of the opportunities that arise out of these paradigm shifts that the sector is going through.

What are the key challenges facing your industry at the moment, and how is your company attempting to tackle them?

Challenges facing the industry include the continuously changing legislative and regulatory playing fields which is why we emphasise upon the development of our professionals. Other challenges which the industry faces on a more global perspective include economic recession and the marked volatility that we are experiencing in the markets. These factors create uncertainty which may make people less inclined to invest.

How important is it for Malta to attract foreign direct investment, and what sectors of the economy offer FDIs the greatest opportunity and why?

Malta has limited resources, therefore it has always relied on FDI in one shape or another, for its economic growth and sustainability. The political consensus when it comes to the financial sector is a key element in creating the right, stable climate to continue to attract and grow FDI in this industry. Malta also has a reputation, enviable I might add, in reacting quickly to market forces, legislating and creating the appropriate regulatory framework to attract and sustain new business streams. Evidence of this is for example the remote gaming sector and laterally the funds and pensions industries. This is an instance where our size matters. Being small allows us to react quickly and work with the competent authorities to create the right landscape to attract and sustain quality business in up and coming sectors. We should not lose this flexibility which is a key competitive advantage when compared to larger economies with more complex administration systems. Financial Services and the e-commerce industries provide ample opportunities and have further room for growth. Our specialised regulatory bodies, the Malta Financial Services Authority and the Malta Gaming Authority illustrate Malta’s commitment to attracting high-quality operators. Such regulatory boards are accessible and forward looking.

Working on an international business stage, how do you feel the international business community views the Maltese business environment?

Malta is a jurisdiction which is perceived positively amongst other countries. Malta is considered as an exemplary economic model which has registered first recovery and then consistent growth ahead of most other countries within the Eurozone following the global financial crisis of 2008. This is in no doubt due to various factors but I would rate the socio-economic and political stability to be of vital importance. Our membership in the EU has also helped us develop and refine our infrastructure in order to adopt directives and common policies. Potential clients know that Malta is a safe, reliable and reputable jurisdiction.

In terms of economic growth and development, what are your expectations for Malta in the coming years?

I expect Malta to further consolidate its standing as an emerging financial services centre in the region. The knowledge that we have acquired as a jurisdiction within the financial services and gaming sectors also makes us a force to be reckoned with and an alternative to more traditional jurisdictions. I also see Malta sustaining its position by being yet again, at the forefront of developing the right infrastructure to accommodate and regulate new up and coming industries.

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