Local supermarket owners demand equal tax regime ahead of Eurospin arrival

Local supermarket owners are demanding a prompt solution to the unequal tax treatment of foreign vs local businesses as they brace themselves for the arrival next year of a major new competitor – Italy’s largest discount food group, Eurospin.

The Shift is informed that following an application by the Sicilian branch of the Italian giant to the Planning Authority, Eurospin will be taking over the Bezzina industrial yacht yard in Marsa and transforming it into its first mega supermarket.

While the Planning Authority is expected to approve this application in a few weeks’ time, as the Environment and Resources Authority has already given it the green light, supermarket industry sources told The Shift that Eurospin will be “hitting Malta by storm as they plan to open 12 stores all over the island.”

Local large supermarket owners, who have already experienced the brunt of cut-throat competition after the arrival of Lidl, complained that they can’t face further knocks if the current tax regime continues to discriminate against them.

Currently, Malta’s tax regime favours foreign-owned businesses as they are able to claim back 30% of their tax dues, effectively paying just 5% tax on their profits. On the other hand, Maltese businesses pay the full 35% of their declared profit.

While Malta is facing international pressure to change its tax regime, which in the last two decades has led to the flourishing of Malta’s economy, particularly in gaming and financial services, it is still resisting sudden changes.

On Saturday, Finance Minister Clyde Caruana announced that a new tax regime would come into force in 2025, in a clear response to pressure from the EU and scrutiny from other international watchdog organisations involved in the decision to greylist Malta.

However, local supermarket operators want something to be done “now” as they think it will be too late in 2025.

“Eurospin is a giant with some €7 billion turnover. We already cannot compete with it even if we were on an equal footing. You can just imagine how we can survive this when they pay 30% less than us,” the owner of a local chain said.

“We were already forced to join our local competitors to create stronger purchasing power due to the Lidl competition,” another owner said.  

While supermarket operators are worried about Eurospin’s Malta venture, the chain’s arrival in Malta may mean good news for consumers who are facing unprecedented price increases, as confirmed by a recent Caritas report.

The latest inflation figures show an 8% increase in food prices during the first months of this year.

This increase, caused mainly by international circumstances, including the pandemic and the ongoing Ukrainian conflict, is expected to continue for the coming months, if not years, forcing more fierce competition among local supermarket chains in trying to give consumers a better choice at lower prices.

The Malta Chamber of SMEs (GRTU), which represents retail operators, has spent years lobbying for the creation of a level playing field. Yet, so far, no concrete action has been taken.

The tax issue is a double-edged sword. Tax practitioners insist that a change in the system might be beneficial for local retail but disastrous for the economy. Practioners told The Shift that Malta has attracted international business and expanded its economy thanks to the tax regime and EU membership. “A different tax system might remove its current attractiveness, and everyone will suffer.”