Finance Minister Tonio Fenech said on Tuesday that Malta was against the tax on bank transactions unless it was agreed to globally. Any such tax would mean that Europe would be turning transactions away, allowing them to go elsewhere to avoid the tax. Large EU member states had already said this was a no-go area.
Winding up the debate on the Various Financial Services (Amendment) Bill, Mr Fenech said that on the other hand, the EC was presenting the second proposal, a levy on banks, as an instrument to create a resolution fund to buffer against a new crisis. On this point too, Malta had made it clear it would not surrender its sovereignty. The sort of levy proposed would probably be so high as to make Europe uncompetitive. Malta disagreed with such a resolution fund because Maltese banks were not to blame for any part of the financial crisis.
To Dr Josè Herrera’s misgivings that banks had substantial client information and could resort to hard selling of their products, he pointed out that the EU prided itself on freedom of services.
The solution for legitimate concerns like Dr Herrera’s was not to limit stockbroking to individuals but to have instruments at hand to strengthen the authorities’ hands, helping to ensure there was an element of regulation and supervision to prevent such hard-selling tactics.
The MFSA had already sanctioned whoever had not followed the remit of their licence. Dr Herrera was off the mark on what he called the MFSA’s leniency when it came to taking action. Steps were always taken when needed.
He made it clear that it would not be the MFSA to license a credit-rating agency, but the new authority being set up at EU level, on which the MFSA would be sitting. Even in the development of the Malta Stock Exchange, the authority had always had the right to insist on credit rating. To date, bonds on the MSE had all been local and of limited volume by comparison with those in the rest of Europe, so the MFSA had taken other steps to substitute credit rating on the local market, such as by making sinking funds mandatory to ensure that investors would be protected.
Minister Fenech said it was obvious that Dr Alfred Sant was still wary of the EU concept. The minister agreed that any rule should be properly assessed, but the emphasis should be at the time it was being drawn up, not when any directive was issued.
The negotiations during the run-up to Malta’s accession to the Union had since given way to participation at full government level in the Council of Ministers, even involving the House Standing Committee on European and Foreign Affairs. Whereas Parliament used to be more reactive than proactive, the EU was now throwing much more responsibility on the local front.
The European Parliament’s role had not only widened but it was now also obliged to go down to the level of national Parliaments. Things had changed for Malta, as evidenced from the issue of VAT on food and medicines. This derogation was due to have remained active until the end of 2009, but a debate in the Council of Ministers had led to a stronger, permanent derogation for Malta to be treated equally like the UK and other member states.
Mr Fenech said the same held true for the process of the design of the Services Directive. Even the drafting of Maltese legislation was being done after consultation with stakeholders. EU membership had helped Malta to a stronger economy with unprecedented opportunities.
The financial sector was already making a bigger direct contribution to the GDP. It had grown from four to seven or eight per cent and still had potential for more.
The minister said those figures did not include professionals who were not in finances, such as accountants, but notaries’ and lawyers’ offices which employed several people. Directly and indirectly the sector’s contribution to the GDP was more like 11 per cent.
Dr Sant had called for more pushing on the government’s part, but financial operators had sometimes complained they were being swamped by the waves of activity in funds, administration, pensions and financial institutions. Growth had been present even in 2009, the year of the financial crisis.
Dr Sant had also mentioned Mario Monti’s document for a more integrated European Single Market, but Malta had always insisted that direct taxation was an internal matter for each state.
Turning to comments by Dr Charles Mangion, the minister said it was very important to have a same-for-all framework so that any credit rating across the EU would be unequivocal.
Mr Fenech said Opposition Leader Joseph Muscat had misquoted the government’s pre-Budget document. As Dr Mangion himself had said, the document was not emotive but technical. The only way to counter reduced competitiveness was to lower wages or increase productivity, and the government had always favoured the latter approach.
Concluding, Minister Fenech said the pre-Budget document must be looked at maturely. No conclusions could be drawn from a document that was only for consultation.