Joe Zahra (former editor of In-Nazzjon), who, as far as I know, does not have any in-depth knowledge of the financial services industry, has contributed an article to this paper in an attempt to rewrite the history of the financial services sector.

For the sake of factual truth, the following must be said.

Joe Fenech, after wresting the offshore sector from George Bonello Du Puis’s hands, did engage Chase Manhattan to set up an offshore activity in Malta. That effort resulted in one piece of legislation that practically set up a register for offshore companies and stated that any registered company will not fall under any Maltese law in Malta, that is reporting, taxation, etc.

Chase Manhattan billed us about €10 million for that effort.

I do not know if any companies in fact made use of this legislation. What I know is that when I took over as finance minister I was faced with a number of notices from foreign governments, such as Holland and the UK, stating they will stop double tax avoidance agreements between the two countries because of such legislation.

This instigated me to strive for the creation of a transparent and regulated financial sector. With the help of the late Mario Felice, Joe Bannister, David Fabri and others, we put together a body of about 13 new laws covering fiscal, financial and company legislation and setting up the Malta Financial Services Centre. We enlisted the international tax, accounting and legal expertise of KPMG UK to assist us.

These laws were reviewed with the EU bureaucrats to make sure the structure we were building did not interfere with our bid for membership. It was also discussed with the countries proceeding to rescind out tax treaties and, as a result, they reversed their decision.

The robust regulatory framework enabled Malta and its banking sector to withstand the 2008 financial crisis

I remember very tough discussions with the finance minister, which was showing the strongest opposition to our developing this economic sector.

If I remember correctly, this exercise cost us about half of what Chase Manhattan had charged us.

The package was explained to members of Parliament who were invited to discuss the details in seminars organised for them and for which a handful attended.

The most important achievement was that the Opposition at the time was also receptive of the development. Lino Spiteri grasped the concept and opportunity and lobbied his party to cooperate.

In Parliament, the baton was taken up by Karmenu Mifsud Bonnici. I remember the first tough three sessions when he dissected the legislation to ensure there were no hidden agendas. When he was satisfied that what we had presented was genuine and wholesome, we went through six months of minute analysis of the laws presented by us. Together, we refined the legislation in such a way that it not only withstood the test of time and is now one of the pillars of our economy but it has also withstood the assaults made against it by foreign governments and some local media.

It must be said that the robust regulatory framework introduced by the financial services legislation and the assiduous implementation of such regulations were the reason why Malta and its banking sector withstood the earthquake of the 2008 EU financial crisis.

The Chase Manhattan disaster was struck off our books.

The financial sector started to be built in a managed way. From the start, I resisted attempts by practitioners to tweak the legislation so they can specifically accommodate clients. I also resisted attempts to go on a fast-growth policy, insisted we should grow at the pace dictated by the graduation of specialised professionals from our University. The University had set up special courses for the sector. Today, we can say the financial services sector in Malta is run by Maltese.

Zahra does not seem to be aware of these efforts and he decided to scratch them out of our history books. But all those who operate in this sector know better.

I must say I was extremely distressed when I was (silently) following what was happening before and during the election campaign and how people in my party, in a mirage of political gains, were threatening the existence of this sector by confusing the Malta financial sector with the activity of local politicians in other less reputable financial sectors.

I was even more distressed when I saw them collaborating with MEPs in this flawed reasoning and who, in the guise of fighting tax avoidance, are in fact protecting the tax revenues of their countries.

Whoever talks of tax avoidance within the context of our financial services sector shows he does not know what he is talking about.

John Dalli is a former European commissioner and finance minister.

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