In my last article (The Sunday Times of Malta, October 22, 29) I looked forward to a root and branch correction of Maltese society, of our institutions and of our way of life. It is our duty to Daphne Caruana Galizia, who was brutally murdered because she was showing us the way to transparency.
Having described how, in my opinion, Malta has fallen off the perch of democratic countries into the subterranean level of countries around the world that are either dictatorships or oligarchies, I will try to offer my dose of solutions. I will suggest a number of actions that need to be taken to bring us back to EU levels once more.
I am an optimist at heart and an indefatigable soul with a belief that Utopia or as close to Utopia as can be, should be the aim of all civilised societies.
On the face of it, Malta is enjoying the best of times, with functioning institutions, wealth generation and record tourism. The façade looks good, but like in most houses riddled with dampness, the whitewash and plaster does not keep. Very soon, dampness creeps in and takes over, dropping whitewash and damaging the walls and everything touching them.
It seems to me that Malta is in this sorry state - a whitewashed country, with a semblance of working institutions (they are manned, they issue accounts, reports and keep to established timetables).
Large amounts of capital flows into and through the country, creating wealth through the crumbs of tax collected by government from these flows, and satisfying all the Maltese who have entered the ‘flatsijiet’ culture that destroys our built environment and our skylines for the sake of the quick buck.
However, Daphne first, and now international investigators like the Guardia di Finanza in Italy, reporters in UK, Sweden, Germany and France, show us that much of this money flow is of criminal or semi-criminal origins.
So what needs to be done?
First of all, let me explain what I mean by ‘The Republic of Light’ and why I chose this title. Malta is not the only rotten apple in the world, and it is possibly relatively cleaner than many of the other jurisdictions that have been mentioned in the Swiss Leaks, the Panama Papers, and now the Paradise Papers. Yet these leaks, for which the honest citizens of the world and busy journalists are eternally grateful, are only a drop in the ocean.
Yet, through the many millions of leaked e-mails, exchanges and schemes, various personalities around the world, whether PEPs or ordinary rich people, have been exposed. These leaks only concern one bank, HSBC and two ‘consultancy firms’ - Mossack Fonseca in Panama and Appleby in Bermuda and Jersey, inter alia - and concern only a minute part of their damaging activities.
The revelations have sent shudders through the wealthy one per cent of the world, who ask themselves: “Am I mentioned in this or that leak?” Likewise the larger multinationals like Apple, Nike and others that have used the Russian doll system of company within company structures and nominee letter box companies to hide from the taxman in their country of origin, thus avoiding trillions of tax in all EU jurisdictions.
If readers and journalists had access to the correspondence, e-mail, mail, phone or even face to face meetings of all the legal and consultancy firms in the world, including our own prime suspect consultant in Malta, BT, snugly ensconced in an office in Castille, I can assure you that whatever the French Revolution and the Russian October revolution did to their overthrown oppressors would look like a picnic.
The honest, tax-paying, middle classes and the full- or part-time employed working classes, and even the slave labour across the civilised world are angry at these multinational companies, the runaway wealthy who have sought refuge and tax avoidance, and are angry at the few rotten EU Member States like Ireland, Cyprus, Malta, Luxembourg and the UK.
All records are stored indelibly in the Cloud, or on local hard discs and servers. Even Skype calls can probably be recalled and are probably stored somewhere in the Cloud. Skype and its owners can be forced to give up the secrecy when faced by a properly-brought court order.
Among others, the Panama Papers revealed that one particular Skype call was due to take place on a certain date in 2013; if that is discovered and retrieved it could shake our broken democracy.
Let the corrupt, the tax evader and criminal fear not only the wrath of God, as Archbishop Scicluna referred to in his sermon at Daphne’s funeral, but also the justice, wrath and injured pride of the Maltese. We are fundamentally a Christian country and basically very friendly and protective of each other. But somewhere on the wayside, these last few years, we have lost that goodness. Mammon has taken over.
We are fundamentally a Christian country and very friendly and protective of each other. But somewhere on the wayside, these last few years, we have lost that goodness
Light needs to be shed upon this way of doing business, namely, of organising schemes to move intellectual property rights, brand valuations and intra-company pricing and invoicing mechanisms set up merely to avoid tax.
Light needs to shed upon the one per cent wealthy people all across the globe, showing how that wealth had been generated and how it has managed to be moved. These people have amassed their wealth, sometimes earned lawfully over centuries, sometimes through talent, like sportsmen, film stars, singers and innovators, or through the suppression of their own citizens, like South Africans who used and believed in apartheid, using those they considered inferior as a modern form of ‘slave labour’ or in other immoral or unlawful ways.
Some have earned their wealth in the Far and Middle East through setting up manufacturing using child or slave labour in China, and other Far Eastern countries, and now are helped by consultants like Mossack Fonseca, Appleby, BT and Identity Malta to hide themselves and their ill-gained wealth from prying eyes or even violent counter actions in their own countries.
Then there are the oligarchs who, upon the fall of the Soviet Union and its allied States, snatched the national assets for a pittance and now, whether through violence against their competitors or by overpricing or monopolies granted to them by corrupt politicians, seek to hide that wealth from their taxmen.
Another group consists of real criminals: the Mafia, Ndragheta, the gun runners and oil smugglers, the drug and narcotics kings and gang leaders, the people smugglers who fall squarely into the criminal category.
Then there are the corrupt political leaders of dictatorships across the globe, from the eastern former Russian States like Azebajdjan, to Russia itself, Middle Eastern rogue leaders and corrupt African presidents and their families who have robbed their countries of wealth, stripped the profits out of national resources, taken bribes to give mining and oil drilling licences. Many of these people bribe countries like Malta.
In my opinion, all of these individuals and corporations are also criminal. They have robbed the other 99 per cent of the world populations and deprived them from sharing a small part of that wealth due to their unwillingness to pay tax in their countries.
At first sight it appears to be a list of foreigners using or misusing our system. Far from it. There is also a large number of Maltese tax evaders, money launderers and criminals who do not pay VAT, income tax or hide their money through intricate company networks. I am sure there are many more Maltese who seem to have a luxurious way of life who only declare part of their real income. These too fear the light.
Basically all tax evaders, criminals, money launderers and ruthless businessmen who do not follow ILO principles dread sunlight. They are like earthworms or cockroaches that come out at night and act in the dark. Governments, like ours, that build shrouds of friendly legislation, soft-touch watchdog authorities, or even participating corrupt politicians are as much to blame as the criminals and tax evaders themselves.
I am very happy that the OECD, Council of Europe, European Commission and Parliament and good modern political leaders like Emmanuel Macron, Angela Merkel and leaders from Sweden, Denmark, Finland, Belgium, Spain and Italy are moving, at last, after having been idle or conspicuous by their absence during the past 25 years. Malta, on the other hand, tries to block Conventions on Bribery and Provision of Services of the Council of Europe, the single corporate tax across the EU and the EU Prosecutor.
Malta blocks, together with the UK, Cyprus, Ireland and Luxembourg and wants all the population of Malta to back our autocratic government in this venture. Just as that courageous lady in the US showing a middle finger to the Trump motorcade (and losing her job for it) a middle finger should be raised to our Prime Minister and his closest ministers of finance, tourism, European affairs and justice.
These multinationals, tax avoiding one per cent rich individuals, criminal gangs and ruthless businessmen like our gaming industry, have been made welcome, have been given VIP treatment at the airport, have government officials who look the other way when they carry out their transactions in certain local banks or use Malta as a transit for blood money or crime proceeds making Malta the laundromat for the Mafia and for certain foreign dictators.
(To be continued next Sunday)
John Vassallo is a former Senior Counsel and Director for EU Affairs at GE, a former Vice President EU Affairs and Associate General Counsel at Microsoft and a former Ambassador of Malta to the EU.