Issue link: https://maltatoday.uberflip.com/i/678126
9 maltatoday, WEDNESDAY, 11 MAY 2016 Editorial Panama goes beyond national politics MaltaToday, MediaToday Co. Ltd, Vjal ir-Rihan, San Gwann SGN 9016 MANAGING EDITOR: SAVIOUR BALZAN ACTING EDITOR: JURGEN BALZAN Tel: (356) 21 382741-3, 21 382745-6 • Fax: (356) 21 385075 Website: www.maltatoday.com.mt E-mail: newsroom@mediatoday.com.mt Naturally, the involvement of other people does not make Konrad Mizzi and Keith Schem- bri any more or less guilty of their own actions. New names do not absolve a Cabinet min- ister and the Prime Minister's Chief of Staff who registered their offshore companies and trusts in tax havens while in office. Mizzi's and Schembri's posi- tions remain just as untenable, and Prime Minister Joseph Muscat may yet rue his ill-ad- vised decision to defend them… albeit taking superficial disci- plinary action against Mizzi. Even if the uproar seems to be on the wane, the long-term consequences for the govern- ment could be serious. Already questions are being asked at international level: concerning Leo Brincat's nomination for the European Court of Audi- tors, for instance, and the fact that he voted in Mizzi's favour. Labour would be unwise to dismiss such questions as 'planted' by the Nationalist party, and even more so to un- derestimate the wave of disgust and anger the Panama Papers, in their entirety, have caused outside Malta. This issue may yet return to haunt Muscat in more ways than Brincat's ap- pointment alone. But Monday's revelations also exposed the extent of rot in a system which is to a large de- gree founded on precisely such dealings. Ultimately, the Panama Pa- pers leak is about the politics of wealth, not just about the people and companies caught with their pants down. Global tax avoidance is a huge problem, and the biggest concern is that it is perfectly legal. While 99% of the people are expected (and do) pay their taxes down to the last cent, the rich get away scot-free with siphoning money elsewhere: money which would not be taxed, and therefore cannot contribute to the improvement of our hospitals, schools, roads and welfare system. The World Bank and the International Monetary Fund (IMF) warned that the indus- trial scale of international tax avoidance revealed by the Panama Papers represents a "great concern" for the global economy, and is having a "tre- mendously negative effect on our mission to end poverty". Although it has never been blacklisted as a tax haven, Malta itself has gained an undesirable reputation as an offshore haven for illicit money within Europe. In order to maintain a competitive edge, Malta of- fers wealthy individuals and corporations advantageous tax rates, using tax breaks to attract investment: some of which could possibly originate from criminal activities, as shown by a recent crackdown on online betting companies with links to the Italian mafia. On a global level, this race to the bottom often irks larger economies and the EU's eco- nomic powerhouses are less than pleased with the laxity of Malta's tax regime. Malta is under increased pressure as Germany, France and Italy are pressing the EU to tighten restrictions on tax ha- vens, after calling for measures to impede "aggressive tax plan- ning" and "profit shifting". Prime Minister Joseph Muscat might be counting his blessings, as the latest revelations could well serve as a smokescreen for his two closest allies… but the real question is whether the government and the opposition intend to reform this rotten system once and for all. For too long now politicians on either side have spoken of Malta's tax regime only in terms of the profits generated by investment, and the associated spin-offs… of which the number is not small. But legislators must also look at Malta's place within the world economy. A national fiscal policy needs more in the way of justification than the mere bottom line alone… other- wise, it would operate no better than any criminal organisation. It is admittedly a complex issue. As with the international arms trade, there is an old argu- ment that 'others would step in if we pulled out'. It is undeni- able that making one country less attractive to global capital will simply push the f low of black money to other territories. The problem is international, and requires a worldwide solu- tion. Intermediary companies and individuals who offer such services – including some local names listed in Monday's leak – play a central role in this sys- tem; and while they undoubted- ly act within the parameters of the law, they also act as vehicles which shift money to places which guarantee secrecy, low or zero income tax rates, and non- cooperation with tax authorities from other countries. Ultimately, we must ask ourselves where we would like to position ourselves on the tax evasion map. Is it dignified of Malta to be an actor in the in- ternational orgy of tax evasion, money laundering and kleptoc- racy? Shouldn't we be asking ourselves instead whether we want an economy that works for all people rather than just the few… an economy based on social justice and the high- est labour and environmental standards?