Issue link: https://maltatoday.uberflip.com/i/767061
maltatoday, SATURDAY, 24 DECEMBER 2016 6 JOSEPH Muscat's audacity to jok- ingly say that his shrinking waist- line is the result of a Panama diet confirms that he has weathered the worst storm to hit his govern- ment but the damage inflicted by Panamagate is permanent. The Panama Papers are an in- delible stain on Labour's desul- tory governance record, perma- nently denting the government's pretension of ever having held the moral high ground in politics. Surely, Muscat's credibility was severely dented by the previous Café Premier and Gaffarena ex- propriation cases but the revela- tion that two of his most trusted men, minister Konrad Mizzi and Muscat's own chief of staff, Keith Schembri, held offshore interests rattled Labour. The two, but especially Mizzi, are accountable to the people, and by setting up offshore compa- nies they betrayed the electorate's trust by not being above suspi- cion in adopting financial struc- tures that could be employed for the hiding of illicit earnings. In this act alone, Muscat's men endangered a government and bred mistrust, making a mockery of Labour's commitment to dem- ocratic governance. Many, including die-hard La- bourites, now see the Labour government as no different from previous Nationalist administra- tions; dishonest and greedy. And by retaining Mizzi in his executive and Schembri besides him in Castille, Muscat stubborn- ly failed to recognise the extent of the public outrage at these revela- tions. Although no illegalities were carried out, Mizzi and Schem- bri's plans to relocate potential business earnings offshore, un- beknown to the Inland Revenue Department, were nothing short of tax avoidance of the highest order. But Muscat stood by his men and by his own admission, he evidently considers himself un- able to complete the energy plans without Mizzi or run the country without Schembri. This has not only startled La- bour die-hard voters but switch- ers are severely disappointed by Muscat's failure to realise that his government has now lost the sheen it had when it was elected in 2013. Panama Papers was a lost op- portunity to genuinely redeem the Labour administration's clumsy and rotten governance record. Muscat's decisions in the after- math of the Panama scandal were cold, political calculations, aimed only at limiting the damage al- ready done. For a prime minister who once said he wanted to govern in po- etry, not prose, Muscat's inabil- ity to act swiftly and decisively remains an albatross around his neck. For not only are people losing trust in the so-called political class but Muscat has also under- mined his moral authority and set very low standards for his government. Ministers and officials em- broiled in current and future scandals will expect to be treated with the same leniency. Labour has so far survived the Panama storm but the issue is far from settled. Questions on a third offshore company set up for a yet unknown person remain unan- swered and the European Parlia- ment's inquiry on the Panama Pa- pers – with a delegation set to be in Malta in February – will shed light on the extent of tax avoid- ance and evasion in Malta. Opposition narrows Labour's lead Unsurprisingly, with Muscat dragging his feet for weeks on taking action over the Panama revelations the Nationalist oppo- sition seized the opportunity and organised two rallies in Valletta which piled more pressure on the government. However, the PN's decision to take centre stage and lead the protests – instead of making way for civil society as happened in Iceland and other countries – might have diminished the demonstrations' effectiveness by tainting the protests with parti- san politics. Panama also presented the op- position with an opportunity to take a clear stand on tax dodging schemes and pledge that no cur- rent and future MPs and officials have offshore interests. The PN has already mapped out a blueprint for political reform where it comes to standards of good governance but with grow- ing distrust in the political estab- lishment, this puts the opposition in no better position to tackle the matter than Labour was following its momentous victory in 2013. Yet, following the Panama rev- elations, the PN enjoyed a small but significant resurgence in the polls with the MaltaToday sur- vey conducted in the subsequent weeks showing the PN narrowing Labour's lead to just one point while opposition leader Simon Busuttil gained four points in the trust barometer. The March survey also showed an increase in Labour voters who trust neither of the two leaders and Panamagate left a greater im- pact on switchers, with the per- centage of those who trust Mus- cat more than Busuttil declining from 38% to 23% while those who trust Busuttil more than Muscat remained stable at 27%. The per- centage of switchers who trust neither leader shot up from 22% to 41%. In the following months Muscat and Labour increased their leads to 7.5 and 3 points respectively, further confirming that Labour had weathered the storm despite coming out of the scandal perma- nently bruised. Panama goes beyond national politics Panama Papers is not just about Konrad Mizzi and Keith Schem- bri. It is about the global system of tax avoidance, where trillions of dollars disappear each year from national tax systems. The Labour administration may have weathered the storm, but the long-term consequences for the government could be serious. Questions are being asked at in- ternational level: almost costing Leo Brincat's nomination to the European Court of Auditors for the fact that he voted in Mizzi's favour in a no-confidence mo- tion. 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. The World Bank and the Inter- national Monetary Fund (IMF) warned that the industrial scale of international tax avoidance re- vealed by the Panama Papers rep- resents a "great concern" for the global economy, and is having a "tremendously negative effect on our mission to end poverty". It is admittedly a complex issue. As with the international arms trade, there is an old argument that 'others would step in if we pulled out'. It is undeniable that making one country less attrac- tive to global capital will simply push the flow of black money to other territories. The problem is international, and requires a worldwide solution. Crisis of morality Muscat's decision to retain his two closest allies showed that Muscat sees nothing wrong with offshore in the first place; other- wise he would have taken the de- cision to sack Mizzi and Schem- bri straight away. Their claim to innocence and Muscat's decision to keep them on board sent the wrong message, an admission that there's noth- ing wrong in meddling with tax dodging schemes and attempts to minimise tax exposure. Unfortunately, the debate main- ly centred on whether Mizzi and Schembri should have resigned or been sacked, killing any rational debate on the role of the financial industry in the Maltese economy. 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. Moreover, in order to main- tain a competitive edge, Malta offers 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 Ital- ian mafia. On a global level, this race to the 2016: Looking back JURGEN BALZAN evidently considers himself un- able to complete the energy plans without Mizzi or run the country This has not only startled La- bour die-hard voters but switch- ers are severely disappointed by Muscat's failure to realise that his government has now lost the sheen it had when it was elected Panama Papers was a lost op- portunity to genuinely redeem the Labour administration's clumsy and rotten governance Muscat's decisions in the after- math of the Panama scandal were cold, political calculations, aimed only at limiting the damage al- For a prime minister who once said he wanted to govern in po- etry, not prose, Muscat's inabil- ity to act swiftly and decisively remains an albatross around his For not only are people losing trust in the so-called political class but Muscat has also under- mined his moral authority and set very low standards for his Ministers and officials em- broiled in current and future scandals will expect to be treated Panama leaves government Panama Papers was a lost opportunity to genuinely redeem the Labour administration's clumsy and rotten governance record. Muscat's decisions in the aftermath of the Panama scandal were cold, political calculations, aimed only at limiting the damage already done JURGEN BALZAN Panama leaves government