Issue link: https://maltatoday.uberflip.com/i/662335
3 maltatoday, WEDNESDAY, 6 APRIL 2016 News A speculative diagram of how an offshore Panama company owned by the trustees running an offshore trust in New Zealand could work: the Panama companies hide their ultimate beneficial ownership, so that they can serve as business facades to issue invoices for property rentals or services rendered, but any payments can be made into a bank account controlled by the trustees as owners of the company, who deposit it in the New Zealand trust fund. This graphic illustrates just one of the legal, if questionable ways, that offshore set-ups can be used. ORION TRUST LTD. PANAMA COMPANIES • Hearnville (Mizzi) • Tillgate (Schembri) DUBAI BANK ACCOUNT NEW ZEALAND TRUSTS • Rotorua (Mizzi) • Haast (Schembri) Konrad Mizzi and Keith Schembri appear as settlers of Rotorua Trust and Haast Trust Beneficial ownerships not disclosed Panama companies are 100% owned by trustees Trusts managed on instructions of Orion Trust and Mizzi/Schembri Trustees run trust funds on instructions of the settlors After Panama leaks 'PM must take hard decisions' – Scicluna MAT THEW VELLA FINANCE minister Edward Scicluna took some time of his speech in parliament discussing a financial services bill yester- day, to remind MPs that the ef- fects of the Panama Papers leaks could be felt on Malta's financial services as the country fights back an attempt by the Europe- an Commission to come down hard on low-tax jurisdictions. "We must consider the politi- cal consequences of what is be- ing reported," Scicluna said. "The prime minister must take the necessary and hard deci- sions in the country's interest." Moving the second reading of a bill to amend the Financial Ser- vices Act, Scicluna called for a unified political front to defend Malta from any attempts by the European Commission to har- monise tax structures across the bloc. "I will meet the OECD to ex- plain that Malta is no tax haven, that it is a legitimate tax centre that has also already been evalu- ated by the European Commis- sion," Scicluna said of Malta's fi- nancial services industry, which in 1994 started phasing out its offshore regime. Now Malta faces an onslaught from the European Commis- sion's attempts to introduce stricter rules on 'BEPS' – base erosion, profit shifting – that allows companies to minimise their tax exposure by moving their holding companies to low- tax jurisdictions. Opposition leader Simon Bu- suttil has claimed energy min- ister Konrad Mizzi's offshore company in Panama will weaken Malta's hand in any EU nego- tiations. But if anything Mizzi steered clear of Malta's onshore regime, and it will be the inter- national ire created by the Pa- nana Papers that will strengthen European Commissioner Pierre Moscovici's will to enforce his BEPS rules. And the same House that on Monday took umbrage at the revelations of Panama Papers and the use of offshore compa- nies by Mizzi and the Prime Minister's chief of staff, was yesterday rallying to stand up to Brussels and its BE- PS rules. "We won't accept tax harmonisation that removes our competi- tiveness or damages Malta," Scicluna told parliament, conscious of the effect that Pana- ma Papers would have in strengthening the hand of critics seeking to level out the European playing field. "We will protect the financial services industry in our country, from competitors in other countries who will use this campaign to undermine our competitive stand." As expected, Opposition MPs pledged their own support for the financial services industry, while criticising the govern- ment over the revelations from Panama Papers and the fall-out it would have on Malta's repu- tation: Energy minister Konrad Mizzi was the only EU minister to have been found to own an offshore company in Panama set up by Mossack Fonseca. At stake is Malta's system of offering up to 85% rebate on tax paid by non-resident share- holders – a refund paid out by the Inland Revenue Department within two weeks of payment of the corporate tax. MaltaToday has filed a Free- dom of Information request demanding the full extent of corporate tax refunds, but since then it has been approached by members of the financial servic- es industry cautioning it from arming the island 's critics with data that could compromise its negotiating position. On his part yesterday in par- liament, the shadow economic minister, Claudio Grech, de- scribed the financial services sector as the source of a high degree of tax revenue by virtue of the high salaries it paid out to employees. "We cannot deny this sector the importance it merits… We must control the fallout from what certain member states want to achieve. We must be proactive. The risk is big to our country's economic make-up." Even Grech called for a sense of unity to safeguard the financial services industry. "This is not an issue pertaining to Labour or Nationalists, this is a national issue pertaining to our econ- omy and I am concerned. The finance minister has to make his best effort to ensure our country is not exposed to any risk and to repel any threat to our fiscal sys- tem, to what makes us competitive." Fighting off BEPS Many will refuse the label, but even Malta plays a game of international 'proft shifting' that uses the imputation system of taxation to slash tax on profits to deliver an effective rate of Malta tax of 5%. Critics – and there are a few of them around – will say that it is tax avoidance artfully packaged under the convenient reasons of 'competitiveness' and 'efficien- cy', ' job creation' and 'economic growth ', even though the Pana- ma Papers' revelations have laid bare the inequality that offshore centres and similar EU-blessed regimes keep propagating. Even Prime Minister Joseph Muscat on Monday was less um- braged about the impolitic deci- sion by his minister and chief of staff to open a secret company in Panama. After Offshore/ Swiss/Lux leaks, the prime min- ister is concerned that Panama Papers is about to make it easier for the European Commission to come down hard on Malta's low-tax incentives. Malta charges 0% tax to non- domiciled chief executives who are paid salaries higher than €5 million, and then 15% on just over €82,000 for a glut of ex- ecutive positions that serve as sweeteners for large multina- tionals that need Malta's finan- cial services industry. It's why energy giant Npower dodged up to £108 million in UK corporation tax by posting a loss in the UK, and shifting its profits to a company, Scaris, in Malta; why in 2010, Australia's Commonwealth Bank used a six-person back-office firm in Malta, CommBank Europe, to save €38.9 million in taxes; and why it is one of many tax juris- dictions employed by chicken restaurant chain Nando's to safeguard its multi-million prof- its. But so has Malta's onshore re- gime opened its doors to people like Isabel dos Santos, Africa's richest woman, the daughter of Angolan dictator Jose dos Santos, who uses Malta for her companies owned by state-con- trolled companies Endiama and ENDE; other companies holding interests here are corruption- stained Odebrecht, the Brazil- ian construction giant, which is implicated in the Petrobras scandal; SOCAR, the Azerbai- jani state oil company; and even a holding company connected to the daughters of Azeri president Ilham Aliyev for their owner- ship in telephony companies. Edward Scicluna