One process which has definitely intensified since Barack Obama assumed the presidency of the US has been the fight by the American authorities against tax havens. The objective is not without its irony, since there have been parts of the US where taxation was not as rigidly enforced as elsewhere. But overall tax evasion is much more than frowned upon. It makes governments lose substantial revenue.
That is why the leading countries of the world have united in recent years to seek accords which would attack tax evasion by citizens deploying undeclared secret assets in other countries. The main accord provided for information sharing, but some countries found a way to keep out of it. The escape ruse was to deduct tax at source and share the proceeds with the governments of asset holders who choose to remain anonymous.
Now even that ruse could come under attack as the net against tax evasion is flung wider. One of the effects of doing that is a long-running exchange between the US authorities and one of Switzerland's two largest banks, UBS. Switzerland is not crudely described as a tax haven; yet it is common knowledge that for decades it led the way as the country most organised to cater for foreign investors according to their requirements, starting from basic secrecy.
Recently UBS announced a deal with the US authorities which merely served to push it in a deeper hole, dragging the Swiss financial system along with it. The bank's chiefs, already under huge stress because of the global financial crisis, announced that they had resolved their old stand-off with the US Inland Revenue Service.
The bank had agreed to disclose data on a number of US taxpayers with undisclosed UBS accounts and, in addition, had assented to pay the IRS a fine of a cool $780 million. The bank's president then made what many considered to be the most hypocritical statement of the century. Swiss banking secrecy was still intact, he said, because banking secrecy was there to protect "the private sphere" (sic), not tax evaders. The Swiss equivalent to a Finance Minister agreed.
It then turned out that the Swiss-American confrontation was not over yet. The disclosure deal announced, the US promptly asked for information on 52,000 other accounts and started legal proceedings in Florida. The UBS replied by saying glibly that it would fight the action.
Meanwhile, a Swiss Federal Court placed an injunction on the transfer of data. UBS shares, already taking a hammering along with other financials beset by dud securitisation and credit woes, fell to their lowest level ever.
The EU joined the financial fray by declaring that it expected the same transparency as the US.
The stand-off appeared to frighten the Swiss hierarchy, apprehensive that the lucrative earnings Switzerland made from foreigners utilising its financial system could be threatened. The authorities appeared to take conciliatory action by indicating that they would dismantle banking secrecy in the same manner that OECD and other countries had done.
The reaction took the form of many loud hurrahs by those determined to fight tax evasion, which is what a substantial part of banking secrecy is all about. The hurrahs suggested a belief that the Swiss financial monster was about to be slain.
Canny observers of these goings-on familiar with Swiss scene think otherwise. They say that Switzerland hasn't really given in on banking secrecy yet, but is simply fighting a rearguard action. As one Swiss newspaper put it, this isn't the finishing line of a sprint, it is the start of a marathon.
What the Swiss government seemed to be saying was that they accept the European criteria on earnings from certain types of funds deployment (mostly through deposit accounts) but will now negotiate implementation. There have been farcical moments, as when the Swiss tried, unsuccessfully, to push through a distinction between tax fraud (a bad thing) and tax evasion (acceptable, possibly a good thing, they suggest).
There was weird entertainment to be found in the contortions the Swiss government is going through so as not to have to take their limited volte face on secrecy to the people. Switzerland being a direct democracy the government would have to refer to the people if a change in the law became necessary.
That particular story continues. Meanwhile, efforts have intensified to identify tax havens and address them without delay to make them change their status. Will Malta fall in that category? It should not. The transparent packet of legislation which regulates our financial sector was intended among other things to make Malta an onshore financial centre, not some offshore tax haven as are still to be found peppered around the world. That is why Malta has never fallen foul of the EU's financial directives.
But the EU and the US are separate entities. The US may not feel bound by what is satisfactory to the EU and could very well pose some queries to Malta, especially since the double taxation agreement has still to be ratified.
This could be a tricky period, one that has to be navigated carefully by people who know what they are talking about. The monetary authorities could have a challenge on their hands. One trusts they will win it. The financial sector remains one of our growth areas. Even as other sectors go into decline, financial practitioners report a continued flow of enquiries that could add new ventures to Malta's impressive portfolio.
No stone can remain unturned to keep it that way. This is where the consensus on financial affairs among our political parties demonstrates its value.
That is why the leading countries of the world have united in recent years to seek accords which would attack tax evasion by citizens deploying undeclared secret assets in other countries. The main accord provided for information sharing, but some countries found a way to keep out of it. The escape ruse was to deduct tax at source and share the proceeds with the governments of asset holders who choose to remain anonymous.
Now even that ruse could come under attack as the net against tax evasion is flung wider. One of the effects of doing that is a long-running exchange between the US authorities and one of Switzerland's two largest banks, UBS. Switzerland is not crudely described as a tax haven; yet it is common knowledge that for decades it led the way as the country most organised to cater for foreign investors according to their requirements, starting from basic secrecy.
Recently UBS announced a deal with the US authorities which merely served to push it in a deeper hole, dragging the Swiss financial system along with it. The bank's chiefs, already under huge stress because of the global financial crisis, announced that they had resolved their old stand-off with the US Inland Revenue Service.
The bank had agreed to disclose data on a number of US taxpayers with undisclosed UBS accounts and, in addition, had assented to pay the IRS a fine of a cool $780 million. The bank's president then made what many considered to be the most hypocritical statement of the century. Swiss banking secrecy was still intact, he said, because banking secrecy was there to protect "the private sphere" (sic), not tax evaders. The Swiss equivalent to a Finance Minister agreed.
It then turned out that the Swiss-American confrontation was not over yet. The disclosure deal announced, the US promptly asked for information on 52,000 other accounts and started legal proceedings in Florida. The UBS replied by saying glibly that it would fight the action.
Meanwhile, a Swiss Federal Court placed an injunction on the transfer of data. UBS shares, already taking a hammering along with other financials beset by dud securitisation and credit woes, fell to their lowest level ever.
The EU joined the financial fray by declaring that it expected the same transparency as the US.
The stand-off appeared to frighten the Swiss hierarchy, apprehensive that the lucrative earnings Switzerland made from foreigners utilising its financial system could be threatened. The authorities appeared to take conciliatory action by indicating that they would dismantle banking secrecy in the same manner that OECD and other countries had done.
The reaction took the form of many loud hurrahs by those determined to fight tax evasion, which is what a substantial part of banking secrecy is all about. The hurrahs suggested a belief that the Swiss financial monster was about to be slain.
Canny observers of these goings-on familiar with Swiss scene think otherwise. They say that Switzerland hasn't really given in on banking secrecy yet, but is simply fighting a rearguard action. As one Swiss newspaper put it, this isn't the finishing line of a sprint, it is the start of a marathon.
What the Swiss government seemed to be saying was that they accept the European criteria on earnings from certain types of funds deployment (mostly through deposit accounts) but will now negotiate implementation. There have been farcical moments, as when the Swiss tried, unsuccessfully, to push through a distinction between tax fraud (a bad thing) and tax evasion (acceptable, possibly a good thing, they suggest).
There was weird entertainment to be found in the contortions the Swiss government is going through so as not to have to take their limited volte face on secrecy to the people. Switzerland being a direct democracy the government would have to refer to the people if a change in the law became necessary.
That particular story continues. Meanwhile, efforts have intensified to identify tax havens and address them without delay to make them change their status. Will Malta fall in that category? It should not. The transparent packet of legislation which regulates our financial sector was intended among other things to make Malta an onshore financial centre, not some offshore tax haven as are still to be found peppered around the world. That is why Malta has never fallen foul of the EU's financial directives.
But the EU and the US are separate entities. The US may not feel bound by what is satisfactory to the EU and could very well pose some queries to Malta, especially since the double taxation agreement has still to be ratified.
This could be a tricky period, one that has to be navigated carefully by people who know what they are talking about. The monetary authorities could have a challenge on their hands. One trusts they will win it. The financial sector remains one of our growth areas. Even as other sectors go into decline, financial practitioners report a continued flow of enquiries that could add new ventures to Malta's impressive portfolio.
No stone can remain unturned to keep it that way. This is where the consensus on financial affairs among our political parties demonstrates its value.