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Malta’s welfare competition - Dennis Avorin

Malta’s reputation has been severely tarnished this year in a series of scandals and so-called leaks where Malta is portrayed as the opportunistic bad boy of Europe, trying to gain an advantage through so-called unfair tax competition.

The chairman of the European Parliament’s PANA Committee, Werner Langen, has accused Malta of having a business model based on corruption and unfair competition within industries such as maritime shipping and gaming.

In my own country of birth, Sweden, the public service television has been running a documentary trilogy investigating the so-called Paradise Papers where Malta is brought up as the ultimate tax haven of Europe. One of the prominent personalities exposed in this media frenzy was the chairman of the Confederation of Swedish Enterprise, Leif Östling, who turned out to have a Maltese company.

During an interview, where Östling was questioned about his tax planning activities, he was asked about why he tried to avoid Swedish taxation, which he bluntly replied: “what the f*** do I get?”

Rather than causing moral outrage, the Paradise Papers documentary of the Swedish public service television led to a tax uprising in social media.

In response to the ensuing debate, Swedish Minister of Finance Magdalena Andersson said she will push for Malta to raise taxes to end its alleged unfair tax competition practices.

It is easy for a small country with low self-esteem to buy into the propaganda of large and reputable EU members. However, coming from Sweden myself I would say that Andersson has greatly misjudged the deeper attraction of Malta. Rather than tax competition, Malta should be accused of welfare competition.

I make this claim partly on the fact that emigration from Sweden has been steadily increasing during the late years, especially for highly educated women, and partly on the basis of a survey I conducted myself on Swedes living in Malta in June this year. Although the survey cannot be said to hold scientific reliability due to the low response frequency, it does give a hint of how Malta-Swedes experience their life circumstances in Malta compared to Sweden.

Malta should not accept the mockery of being accused of unfair tax competition. Malta is rather a case of welfare competition

The survey received 97 responses from a wide variety of people at different education and income levels, age groups, and an almost equal amount of men and women. They were asked to assess the difference between Sweden and Malta in a number of areas.

To my great surprise, only the quality of financial services, food, public transport, infrastructure, general public service, garbage disposal and working conditions were experienced as worse in Malta than in Sweden. Work environment, work-life balance, healthcare, kindergartens, schools, housing, bureaucracy, taxes, quality of life, safety, climate, prices of daily expenses, societal climate, and entertainment were all perceived as good as, or better in Malta than in Sweden.

As many as 39 percent also saw themselves as permanently emigrated from Sweden and 50 percent said their main reason was to “search for a better quality of life”. Only eight percent had emigrated due to taxes, which is on a par with the seven percent who had left Sweden for Malta due to a search for safety.

Finally, I also asked the respondents whether there was any chance of them moving back to Sweden if there were dramatic political changes in a number of selected policy areas.

As many as 28 percent ticked the box “societal climate in general” while 25 percent ticked “taxes and regulation”. Four percent even ticked “healthcare” and 14 percent “housing”. This implies that the attraction of Malta among Swedes is not primarily about taxes, but about welfare.

This point might be hard to digest, which is perfectly understandable due to the so-called confirmation bias – our human tendency to favour and recall information that confirms our pre-existing beliefs or hypotheses.

Therefore, Malta should not accept the mockery of being accused of unfair tax competition. Malta is rather a case of welfare competition, a competition that countries like Sweden are finding increasingly hard to maintain with rising taxes but an increasingly gouged welfare state that can barely sustain law and order, pensions, healthcare, or even the primary education system, hence the desperation.

Swedish welfare today is best captured by the Chinese phrase “paper tiger”.  It appears threatening but is ineffectual and ready to collapse at any challenge. Malta is on the opposite trajectory, everything is steadily improving.

Dennis Avorin is a Swedish-born professional policy analyst resident in Malta.

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