Issue link: https://maltatoday.uberflip.com/i/1394990
I t is certainly a dark cloud that is tar- nishing our reputation as a financial domicile aer, a month ago, the FATF gave us the dubious honour of being the first greylisted country in the 27-mem- ber block. Imagine, the dirty boys in the block are not the Russian "funds-infest- ed" Romania, or Latvia with its shaky banks, neither Hungary or Poland with strong arm tactics over members of their judiciary, but tiny (hitherto squeaky clean) Malta. Everyone hopes that this cloud will float away and let in the sunshine so we can enjoy our crystal-clear waters. Real- istically, we know that living in hope is a risky habit so let us collectively take the bull by the horns and start a root and branch reform of the three factors that earned us the greylisting. Some may remember the bad old days when leaks of sensitive files were de rigueur in FIAU's recent history. Just four years ago, sensational leaks of im- portant investigations by FIAU surrep- titiously landed on the laps of media reporters. It is curious to recall how its senior director Dr Manfred Galdes led the FIAU between 2008 and the fateful summer of 2016, when he resigned be- fore concluding the intense analysis of Pilatus Bank where he admitted under oath that his due diligence team were not satisfied with answers to queries. At one time, Galdes had decided to go straight to police commissioner Mi- chael Cassar with delicate information including details of bank transactions, companies and memos because he feared the information would be leaked or held up, as he had received reports that information was taking long to reach the police. Cassar as head of the police force resigned the following day. Some months following Galdes's resig- nation, the FIAU sent Pilatus Bank (a private bank owned by an Iranian share- holder) a letter saying its shortcomings "no longer subsist" ostensibly on the strength of a joint report drawn by Pi- latus' auditors and its legal advisers. e death knell rang for Pilatus bank when it was officially shut down by the Euro- pean Central Bank in November 2018. is resulting pressure on the finance ministry paid dividends as the FIAU has since seen its budget increase ten- fold, more so after a MoneyVal report exposed massive lacunae and said Mal- ta risked being blacklisted. While other EU countries have not escaped the in- cidence of financial tax scandals, yet in Malta we pride ourselves that the reg- ulatory net has always been efficacious to keep out the bad wolf. Recent events have proved our opinion to be over am- bitious. We are still feeling the cold blast of negative publicity following the disclo- sure by a slain journalist of three Pana- ma companies opened by Nexia BT (an audit firm) destined for top members of cabinet. e slate must be wiped clean. We cannot afford to continue tarnishing our international reputation and under- mine national institutions meticulously build over the years. In a democracy, we respect freedom of speech and the rule of law. Party apologists say such rights can be abused and stretched like a rub- ber band fearing the latter was pushed beyond its safety limit. As always, the common good must prevail over parti- san pique, which if used and abused can ruin the sense of fairness and the ethi- cal core of this country. is greylisting certainly makes the task of Malta Enter- prise to attract new FDI more tenuous. It is high time that we rebut this haem- orrhage of unfair criticism branding us as a centre for corruption, money laun- dering and a tax haven. We are not spot- less but for fairness sake a sense of pro- portion is warranted. Surely, all our sins pale into insignificance when compared to the Luxileaks report. Here multina- tionals signed covert tax deals with the Luxembourg finance ministry (current- ly president of the EU) saving millions in taxes. Another scary story involved tax eva- sion by US multinational Amazon. It has been ordered to repay €250m in illegal state aid to Luxembourg, as EU author- ities continue their campaign against sweetheart deals that help big corpora- tions evade taxes. Luxembourg's "illegal tax advantages to Amazon" had allowed almost three-quarters of the company's profits to go untaxed, allowing it to pay four times less tax than local rivals. e Commission said Amazon had bene- fited from an illegal tax deal granted by the Luxembourg authorities that al- lowed the company to artificially reduce its tax bill by €250m from 2006 to 2014. Not surprisingly, Amazon rejected the findings of the investigation. More excitement revolves around the Cum-Ex scandal which revealed how an organised group of bankers had ap- propriated over €55 billion from public funds, notably in France and Germany, over the past 15 years through the so- called Cum-Ex deals. Bankers, lawyers and other intermediaries were trading shares and receiving reimbursements for tax that had never been paid. e scandal came to light five years ago, when it emerged that several German banks had exploited a legal loophole which allowed two parties simultane- ously to claim ownership of the same shares. is involved banks and stock- brokers rapidly trading shares with ("cum") and without ("ex") dividend rights, with the aim of being able to conceal the identity of the actual owner and allow both parties to claim tax re- bates on capital gains tax that had only been paid once. is scheme contrived a surreal "dual ownership" which allowed both parties to then claim tax rebates even though both were not entitled to it. With the process having gone undetected for years, millions in tax went uncollected by the German state, mostly in the form of rebates which should never have been paid out at all. When writing about tax scandals, it does not rain, it pours. Having men- tioned some of the more glaring pec- cadillos of competing financial centres, one cannot but reflect that for many years now, practitioners in Malta have put their shoulder to the grinding wheel to build a good reputation. We all agree that we have to fight corruption and abuse of power. Hopefully sufficient progress is reached at the current Fi- nanceMalta annual conference on a broad consensus for stakeholders to join forces in doing our part to help the country regain lost ground. A dark cloud obscures a sunny afternoon in summertime 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 8 OPINION 22.7.2021