I write as Malta’s former minister of finance who was responsible for building the foundations of today’s thriving financial services industry at a time when Malta’s accession to the European Union obliged us to do away with our previous offshore regime, which internationally labelled Malta as a tax haven, and ensured we become a respected onshore financial centre.
Since 2004, Malta’s revised tax system has done away with the low-tax international trading companies and incorporated its fiscal benefits within our mainstream tax system, doing away with secrecy provisions and ensuring Malta was on the recognised white list as a jurisdiction.
We actively discouraged shady business. We enforced in our financial institutions the obligations of enhanced due diligence to ensure Malta is not used for money laundering purposes and becomes host to shady structures. We always advocated that Malta was looking for quality, not merely quantity that could give us a quick buck but jeopardise our reputation with devastating effects.
It hurts me to see Malta listed on the Panama leaks as a tax haven because a local firm, BT Nexia, partnered a firm of international questionable repute of the likes of Mossack Fonseca, used extensively by shady politicians and dubious individuals to design secretive structures to evade taxes and launder money.
This same company then becomes the adviser on the personal affairs of the Energy and Health Minister and the Prime Minister’s chief of staff. It set up secretive structures for them, including a secret company in Panama for very questionable reasons. All this happened when EU-wide efforts were underway to actively eradicate such practices and expose offenders.
The Finance Minister insists Malta is against tax evasion and money laundering and stands firm in its intent to continue cooperating with its international partners to combat such practices.
The latest events have rendered our position very weak and seriously undermined our financial centre’s credibility
We have long done away with our secrecy provisions and followed OECD recommendations because we all agree that secrecy is wrong.
Except, that is, for the Energy Minister who, when asked whether to opt for transparency, chose total secrecy. He also did not declare his trust to the tax authorities, wanting to make us believe he included it in his ministerial declaration, which, to date, remains unpublished.
We all agree in this country that the EU position on tax harmonisation is a step too far.
Our country cannot lose its fiscal sovereignty if we want to fairly compete and compensate for our physical disadvantages. Some in Europe try to misinterpret this position and accuse us of favouring tax havens. This is far from the truth and Malta has proved itself, time and time again we are after serious business, FDI that is looking at Malta not merely for its efficient tax system but for its skills, infrastructure, innovation and so much more.
These latest events, however, have rendered our position very weak and seriously undermined our financial centre’s credibility.
How can Edward Scicluna defend Malta’s position without being perceived as somehow wanting to defend his colleague Konrad Mizzi and the Prime Minister’s chief of staff?
Only these two individuals and the Prime Minister seem to believe that it is perfectly fine to have a secret company in Panama for whatever reason.
We now discover that the purpose of these companies was to receive brokerage and consultancy fees, which activities Mizzi is barred from engaging in, precisely because he is a minister.
Mizzi claimed he had no bank account in the company because it was intended merely to hold a property. The trust in New Zealand was enough for such a purpose, so why open the Panama company?
He defends himself by saying the company had no bank account, but now we know he sought to have one but did not manage because two banks denied his request, though he would have us believe no request was made by him.
Advisory firms tailor their services to the client’s needs and requests. Thus if they went to source a bank for the company it is because it intended to do much more than simply hold a property and was expected to receive money as part of its activities.
The two banks that were approached refused to open the accounts because they realised that the persons receiving brokerage and consultancy fees were politically exposed persons.
The two banks, one in Dubai and the other in Panama, also saw the request was dodgy.
How the Prime Minister, whose first responsibility is to defend the national interest and, in his own words, the reputation of our financial centre, fails to see this whole affair as being dodgy because no money was involved is beyond comprehension.
What further evidence is re-quired? What if the minister and the Prime Minister’s chief of staff have other structures? Can we trust them?
The Finance Minister can only defend Malta’s position if the standards of governance of this government are beyond rhetoric.
When the Finance Minister is challenged by his EU colleagues because they read that a Cabinet colleague had a secret company in Panama, the minister should reply: “Malta is committed to the fight against tax evasion and money laundering, and that minister was fired.”
Tonio Fenech is a former finance minister.