Issue link: https://maltatoday.uberflip.com/i/252940
maltatoday, SUNDAY, 2 FEBRUARY 2014 10 News Inglorious attack, inglorious retreat Who won and who lost in the zero sum partisan game played by government and Opposition on the fate of the Individual Investor Programme, JAMES DEBONO asks? Joseph Muscat: an inglorious retreat? The agreement between the gov- ernment and the European Com- mission stipulating a year of "effec- tive residence" before the granting of citizenship to rich migrants ex- posed Muscat's over-confidence in rushing through parliament a de- fective law which was bound to stir international controversy and cast a shadow on Malta's international reputation. The government ended up ac- cepting what it had voted against in parliament in November 2013 when the original law was ap- proved: namely, the abolition of the secrecy clause, linking the scheme to investment, and accept- ing the principle that residency should precede the award of citi- zenship. It exposed a lack of tact, attrib- utable to the inexperience of the new government and an inability to foresee the all-too-predictable reactions in Europe and the rest of the world. In fact, much of the initial outrage in the international press was directed at the poorly thought-out secrecy clause, which was only withdrawn after the bill was approved by parliament. Had Muscat proposed a scheme with no secrecy clause and tied to investment and residence, he would have spared Malta a lot of bad press and a specific mention in a European Parliament resolution endorsed by all political families – including Muscat's Socialists and Democrats group. Even in its latest incarnation, the IIP still defies the non-binding EU parliament resolution, which clearly states that citizenship should not be "tradable commod- ity". Once again, Muscat has iso- lated his party from the European left, even though the Commission's acquiescence seems to put paid to its own umbrage. In the meantime, Muscat man- ages to display two sides to him- self: he is ready to fan the flames of euroscepticism by resorting to hard-talk on the EU and depict op- ponents of the national scheme as 'traitors', but he is sensible enough to turn things around whenever he faces the risk of legal sanctions which would expose him as an in- ternational pariah. Again this is reminiscent of the aborted pushback of migrants in July, when Muscat back-tracked after being faced by an injunc- tion from by the European Court of Human Rights. Now, faced with the prospect of an infringe- ment procedure no the IP, Muscat played ball with the Commission, securing a favourable compromise. He may be tempted by Mintoffian delusions of grandeur… but unlike his predecessor, he knows where to draw a line. Ultimately, if the scheme is suc- cessful, Muscat will reap the funds before the next election, enabling him to avoid hard fiscal choices like increasing taxation or reducing social expenditure, while retaining the income tax cuts inherited from the last Gonzi administration. But the impression that the IIP funds are indispensable for his plans, exposes Muscat's Achilles' heel – something that was noted by the Opposition in its attempt to thwart the scheme. He risks be- coming dependent on easy money from a dubious scheme, which would only serve to delay neces- sary structural and painful reforms the country needs. On top of all that, he still remains open to the risk of a devastating international scandal if some con- troversial tycoon manages to slip through the due diligence process. All eyes are on him. It may win him the next election, but Chavis- ta-style spending from the IIP to fund social spending. His goal may well be that of achieving social- ist objectives through neo-liberal measures like selling citizenship. But the flipside is the erosion of the social pact that is based on income redistribution from high-income earners to low-income earners in- side the same community. Much depends on the amount of money the scheme will ultimately rake in from the outside. The new residency clause, alleg- edly a 12-month period that does not necessarily demand the physi- cal presence of the applicant, is yet to be defined: it could be the result of future bickering with the EC, which has demanded "effective residence", while Muscat claims this won't mean residing here for a full years. Until it is clarified whether the Commission is look- ing at the international tax model of 183 days as proof of residency, the agreement remains a legal minefield, and it may reserve further surprises for Muscat if he's been lured into a trap of much more onerous terms. So far, it seems he's equated the one-year residency requirement to the minimum six-month waiting period required for due diligence purposes. On this Muscat may have suf- fered a setback, but he avoid the Opposition's proposition of a five- year residency, designed to deny him the funds he needs before the next election. He may have invited the Opposition into a full-frontal attack which leaves him bruised, but he also rallied his core vote for the European elections. Ultimately in the zero-sum game between the PN and PL, Muscat loses out on credibility, good gov- ernance and ideological coherence. Muscat may be tempted by Mintoffian delusions of grandeur, but unlike his predecessor he knows where to draw a line Joseph Muscat Simon Busuttil