Issue link: https://maltatoday.uberflip.com/i/826629
maltatoday, SUNDAY, 21 MAY 2017 4 News 'Nothing offshore about Malta' – Scicluna CONTINUED FROM PAGE 1 News of the Malta Files yester- day took their predictable course: instead of a debate on tax justice in Malta, political pundits sought to throw around blame for the way the international press was por- traying the island. Every year, Malta receives over €240 million in international tax receipts thanks to its unique tax system, which gives foreign share- holders up to six-sevenths of the 35% tax they pay on profits gener- ated overseas and booked in their Malta holding companies. But finance minister Edward Sci- cluna said Malta was being bullied by other European entities, saying the island's taxation and remote gaming framework was the envy of other nations. "If we don't present a common front, irrespective of our political colour, it would endanger invest- ment and jobs in Malta." Prime Minister Joseph Muscat dubbed the Malta Files "an un- precedented attack" on the island's financial services. "One should not be happy at these accusations. Nothing in the Malta Files is actu- ally secret. Indeed, I will present a solid defence of our system. I ap- peal for a national front." Muscat insisted this was a time for the country to come together to present a united front and safe- guard Malta's fiscal system. "I am prepared to work with the opposi- tion towards rebuilding a consen- sus on this issue," he said. "It is our duty to defend our country and I – for one – will be defending our country." Muscat also said claims of "off- shore" companies in Malta were factually incorrect. "If we want to moralise about our system hosting pay-day loan com- panies or gaming companies, we can have that debate. But I say we have a competitive system, and the complaint of other countries is not that these companies must not ex- ist, but that they want the tax these companies pay. "But Malta is a full-time member of the EU, not part-time. And a basic point of the single market is freedom of establishment. So I have no difficulty to defend the system. We're not alone in the European Council – a prime minister I speak to told me 'the day they touch our taxation is the day we'll say no to everything [in the EU]." Scicluna: No secret set-ups Despite the massive interest of the European press in Malta's tax regime, the island has never been chastised by the European Com- mission or the Organisation for Economic Co-operation and Devel- opment (OECD) over the system or any possible lack of access to infor- mation. A recent report on aggres- sive tax avoidance systems in the EU, did not even mention Malta. "Whenever a country, for ex- ample Germany, asked about a particular company, the Maltese authorities immediately provided all the information in their posses- sion," Scicluna said, who this week was in Berlin speaking to the press about the imputation system. He also said that he had never received any complaints from Ger- man finance minister Wolfgang Schauble. "Our tax regime and remote gaming framework is the envy of other countries, and we do not have any offshore companies in Malta." "There is no banking secrecy in Europe and we have tax exchange information accounts; we haven't had bearer bank accounts since before 2004, while other EU coun- tries still have them. Under the Tax Justice Network's transparency cri- teria, Switzerland and Panama are at the bottom of the list. Malta is ranked 50th, while Luxembourg is 54th and Germany is ranked 55th." Scicluna called on political parties and operators in the financial sec- tor to strongly confirm their sup- port of Malta's fiscal regime. "From the little I have seen thus far, this is obvious spin and has nothing to do with local governance. This time, they are going for the country's jugular, hitting us where they know it will hurt us: the fiscal regime and the regulatory regime. I urge opera- tors in the financial sector to stand up to this attack that is threatening their livelihood and to defend their country, away from politics." Party reactions The Green Party, Alternattiva Demokratika, certainly felt more vindicated by the leaks of 100,000s of documents published by the EIC. network that show Malta enabling companies to pay very low tax on profits. "International companies are us- ing Malta as a pirate's base, to avoid taxes across Europe. We congratu- late the two parties in parliament, which approved the laws that made us pirates. They are now linking us to the Italian Mafia, Russian loan sharks and the Turkish elite," dep- uty chairperson Carmel Cacopardo said. "It's the PL and the PN that brought our country into disrepute, with a system that allows abuse, glaring conflicts of interest and a lack of ethical behaviour. And we cannot not mention Konrad Mizzi and Keith Schembri." PN leader Simon Busuttil on the other hand, claimed the Malta Files would have not been published had Joseph Muscat "taken decision ac- tion" on the Panama Papers scan- dal. "The only possible explanation as to why we have reached this situa- tion is because Muscat let Malta's reputation get destroyed," he said at a press conference earlier today. "Had Muscat taken an immedi- ate decision as soon as the Panama scandal broke out, then we wouldn't be in the situation we are in today, and no one would have tried to at- tack Malta's reputation. However, as soon as foreigners [sic] saw that there was a cloud of corruption hanging over the Prime Minister, they turned against us." Busuttil said he strongly disagreed with the reports, arguing that no offshore companies are registered in Malta and that the island was not a tax haven. "Such reports are very damaging to the country, and I reiterate the PN's full support to the financial services sector in these hard times," he said. "It is now in the hands of the Maltese public to get our coun- try out of this situation." He said the PN would announce "emergency plans" for the financial services sector after meeting finan- cial practitioners next week, pledg- ing a high-level group of financial services experts to take stock of the current situation. Joseph Muscat vows to present solid defence of Maltese taxation regime A short history of Malta's taxation regime MALTA'S offshore company regime was revoked in 1994 as pressure started mounting from international blacklist- ing, among them the Organi- sation for Economic Coopera- tion and Development. Under the Companies Act (1995), all offshore laws were revoked. When Malta started its EU accession talks, new rules had to be introduced to change its international taxation corpo- ration rules, but upon acces- sion in 2004 it retained its six- sevenths rebate on tax paid on income generated from over- seas operations. While Malta is renowned as an FATF and OECD compli- ant jurisdiction, with double taxation agreements and tax information exchange agree- ments in place. The system enjoys cross- party consensus, and pretty much no MP or politician as- sociated with Labour and the Nationalists today is in any place to blame any reputation- al fall-out on either party. Additionally, the system does not discriminate be- tween different companies – unlike countries like Ireland and Luxembourg, which has created tailor-made tax rates for multinational giants like Apple. Malta's tax system has been targeted for some time: a tax haven abuse bill in the US Congress had included Malta in its list, and the European press from time to time has written extensively about cor- porations like BASF or Sixt setting up holding companies in Malta to be taxed here. Joseph Muscat yesterday de- nied that the Panama Papers have shone a different light on Malta, by weakening its reputational strength inside the European Council. Addi- tionally, Edward Scicluna said there was no EU pressure on Malta to change its taxation system, or that tax harmonisa- tion was on the agenda. With over €240 million in international tax receipts eve- ry year, and thousands of jobs inside the financial services in- dustry, only a further diversifi- cation of the Maltese economy can counter any advance from other EU member states – notably France and Germany – to curb Malta's competitive edge on taxation. The Malta Files show how Malta works as a base for tax avoidance inside the EU, wel- coming large companies and wealthy private clients who try to dodge taxes in their home countries. Critics and tax justice cam- paigners say this damages the budgets of other EU countries and reveals a weakness in the European Union, which al- lows member states sovereign rights over their taxation. Finance Minister Edward Scicluna (left) with the Prime Minister: Malta is being bullied