Malta-based firms’ shares slide after OECD corporate tax deal

Online gambling companies headquartered in Malta saw their share prices slide on 11 October after a 15% minimum corporate tax rate agreement was struck by the Organisation for Economic Co-operation and Development (OECD). On Friday 8 October, 136 countries and jurisdictions representing more than 90% of global GDP agreed to what was described as a “landmark deal” that will affect multinational enterprises (MNEs) from 2023. The minimum tax rate will apply to companies with annual revenue above €750m (£638m) per year and is forecast to generate around $150bn (£110bn) in additional global tax revenue per year. The sell-off in certain gambling stocks was thought to be driven by a fear that listed operators and suppliers registered in the igaming hub of Malta will be heavily impacted by the hike. Local businesses in Malta hand over 35% tax on profits, yet international firms pay an effective rate of just 5%. At one point, Evolution’s shares tumbled by more than 6% on the OECD announcement, while Kambi closed almost 6% down on the Nasdaq Stockholm. Kindred Group, which had already seen its share price impacted by being shut out of the newly regulated Netherlands, dipped by almost 4% before rebounding. The “ground-breaking” deal, as the OECD put it, will be delivered to G20 finance ministers in Washington DC on 13 October, before then going to the G20 Leaders Summit in Rome at the end of the month. OECD secretary-general Mathias Cormann said the deal, which forms one half of a two-pillar tax agreement, was a “major victory” and that it ensures the international tax system is “fit for purpose”. The agreement on a minimum corporate tax rate comes four months after the Financial Action Task Force (FATF) greylisted Malta, confirming structural weaknesses in the country’s anti-money laundering framework. The Paris-based FATF’s decision was the first time an EU member state had ever been greylisted. This, combined with the minimum corporate tax rate, is a double whammy for this island nation where more than 300 igaming licensees employ around 6,500 people. The online gaming industry accounts for more than 13% of Malta’s annual GDP.