Issue link: https://maltatoday.uberflip.com/i/1267406
09.07.2020 8 OPINION T he European Commission is rec- ommending a "phasing out" of Malta's citizenship sale scheme, in a letter sent to the government. e govern- ment's decision to draw a line under the existing Individual Investor Programme – prompted parliamentary secretary Alex Muscat to say the government was "scrap- ping" it. Under the new scheme, applicants who invest €750,000, up from €650,000 under the existing rules, will be able to apply for citizenship after living in Malta for one year. Another amendment targets those applicants who invest €600,000 will now have to spend three years in Malta before applying for a passport. Rent option has gone up to €18,000 annually. e minimum value of the property purchased will double to €700,000 from €350,000. A €10,000 philanthropic dona- tion will be mandatory. ere has been a background of EU correspondence on the subject for the past year. In fact, Justice Commissioner Didier Reynders confirmed during a re- cent European Parliament Civil Liberties and Justice committee debate that the Commission had written to Malta, Bul- garia and Cyprus about transition away from such schemes. Reynders said the commission has re- ceived feedback from all three countries about the request. A European Parlia- ment delegation had described Malta's scheme as risking "importing criminals and money laundering into the whole EU". Last November, a magisterial inquiry was opened after one of the scheme's agents was secretly filmed at their of- fices in Valletta, boasting about how his high-level connections could facilitate the application process. In the local scene, 170 IIP agents have signed and pay an annual licence to pro- mote the IIP scheme yet the interest has waned and only about 50 are active. All this needs to be factored in the light of stiff questions by the Moneyval team on the AML due diligence and transparency. It is not a level playing field since most IIP agents face uphill struggles and stiff competition from other much cheaper EU countries offering citizenship by in- vestment such as Bulgaria, Greece, Ire- land and Cyprus. e latter offer much easier terms to naturalise applicants hailing from outside the EU. It is an open secret that Malta lost the lucrative Asian market as the latter prefer to invest in cheaper property schemes for residence and passport packages offered in Turkey. A case in point is the recent visit by Vĕra Jourová, EU Justice Commissioner who stated inter alia that "We must not enable suspicious people to acquire Eu- ropean citizenship through an easy way and use it to launder money or to pose some sort of security threats to the con- tinent". e irony is that the sole concession- aire for Malta ie Henley & Partners has been a great success story and reaped more than €32 million in fees (apart from legal and due diligence charges) and organises global conferences which are all personally addressed by the Prime Minister. e latter rebuts criticism that he is making undue preferences by say- ing such service is free. Needless to say, no such patronage is on offer to the rest of unremunerated agents who on their own steam also fund simi- lar events. It dawned on the opposition that tax payers are footing the travel and first class accommodation bills for the ex-prime minister yet Henley continues to collect 8% on all its passport revenues as stipulated in its contract which runs to 2023. Magnanimously, Joseph Muscat the ex-prime minister, showers positive comments each time he addresses dele- gates at Henley & Partners global events. He proudly announces that Malta's due diligence structure is next to the gold standard. Not so salubrious was a report published by Transparency International and Global Witness 2018. It looked at various aspects of the schemes offered by Cyprus, Malta and Portugal, and the flaws or loopholes in each, stressing that "insufficient due dil- igence, wide discretionary powers and conflicts of interest" could open Europe's door to the corrupt. Every time the me- dia ups the ante, the MIIPA in its circu- lars harks the agents to do their calling to properly sift all applications. It officially reminds them that they have a duty, as representatives of the in- dustry, to rebut incorrect information which makes it to the public sphere. It frequently finetunes internal application forms in a drive to collect more details. Applicants may now rely on a benefactor to make the investment on their behalf. It is noted that while the benefactor is thoroughly checked on a declaration of sources of wealth and funds, yet the law (as it stands now) does not require enhanced due diligence on the bene- factor. In conclusion, nobody harbours any doubts that the passport scheme enriched the country with extra capital flows as each passport generates a sub- stantial sum to the National Develop- ment and Social Fund. During the Covid pandemic, four-fifths of income from Malta's cash-for-passports scheme is going into the government's account to cushion the economic cost of paying out wage supplements. e 4/5th rate is a temporary measure, because under normal circumstances, just 30% of income from the Individual Investor Programme scheme goes into the government's account (Consolidated Fund). e bulk of income, 70%, is held and invested by the National Develop- ment and Social Fund. IIP: plucking the goose that lays the golden egg George Mangion George Mangion is a senior partner of an audit and consultancy firm, and has over 25 years experience in accounting, taxation, financial and consultancy services. His efforts have seen PKF being instrumental in establishing many companies in Malta and ensured PKF become one of the foremost professional financial service providers on the Island jonathan Cardona, CEO of IIP Malta It is an open secret that Malta lost the lucrative Asian market as the latter prefer to invest in cheaper property schemes for residence and passport packages offered in Turkey