Issue link: https://maltatoday.uberflip.com/i/916779
10 maltatoday SUNDAY 17 DECEMBER 2017 PAUL COCKS MALTA has raised too high a profile and has been in the inter- national news far too often – and for the wrong reasons – for its reputation not to be negatively af- fected and its financial services not to come under scrutiny, a leading stockbroker has claimed. Paul Bonello, of Finco Group, told MaltaToday that Malta's per- ceived reputation abroad had been steadily deteriorating in the last years, but especially so in in 2017. "Although this perception may not match the technical reality of the state of affairs when considered holistically, perception in matters of reputation is as important as re- ality," he said. Bonello, who had formed part of a three-men advisory committee set up to advise the Government on the transition from the offshore to the onshore financial services regime, said that had the European Parliament on Wednesday voted to add Malta to a blacklist of tax havens, the effect on the entire gamut of international financial services, including gaming compa- nies, would have been disastrous. It would also have had a spill-over adverse multiplier effect on other industries, including property and hospitality. A motion debated in the Euro- pean Parliament on Wednesday – calling for Malta and three other countries to be added to a tax ha- ven blacklist – was only defeated because of the abstentions. The vote ended in a dead im- passe, with 327 votes in fa- vour and 327 against. The 24 abstentions were what tipped the scales against the motion presented by the So- cialist and Democrat Group, of which the Labour Party forms part. "Government's failure to harness support amongst its own Socialist family within the European Par- liament is proof of its failure in its diplomatic efforts," Bonello said. "There is no Plan B in the event Malta is declared a tax haven and if that happened, our economy would suffer enormously, [since] there is no magic wand to unwind such damage, whoever is in gov- ernment." Kenneth Farrugia, chairman of Finance Malta agreed that had Malta been branded as a "tax hav- en" – alongside Netherlands, Lux- embourg, and Ireland – the reper- cussions would have been negative for Europe as well as at respective individual country level. "It must be remembered that Luxembourg and Ireland are two highly established financial centres in Europe that service significant non-EU business," he told Mal- taToday. "Equally so, Malta has – post-EU membership – also ex- perienced significant internation- al-led growth traction in a number of financial sectors." Farrugia, however, said he was perplexed as to why the tax haven label was still being banded about by domestic and international me- dia. He noted that in March and No- vember 2006, the Maltese tax sys- tem had been discussed with both the European Commission and with the Member States within the Code of Conduct Group which reviews tax measures to enable a determination as to whether they are harmful in terms of the Code of Conduct for Business Taxation. In its report to ECOFIN of No- vember 2006, the Code of Conduct Group expounded on the Maltese tax system, which had been agreed upon by the same Group, and also provided numerical examples to assist in the analysis. "From the outset, Malta was and has always been transparent about its tax system," Farrugia said. "Malta's aim was always to have an attractive tax system, one that relied on statutory law and legal certainty and not one which relies on the discretion of the tax author- ities, through tailor-made deals with taxpayers." Standing up to pressure Bonello said Malta was unwit- tingly playing into the hands of countries like Germany and France who would prefer to see Malta's role in the EU as a place in the sun and a holiday playground for its population rather than a credible centre for serious international business. France and Germany have been consist- ently calling for tax harmonisa- tion across all European Union member states in recent months, spurred by the Panama Papers and Paradise scandals and growing concerns about austerity measures. Farrugia said that the discussion within the EU revolving around a "tax reform across the bloc" and its implications on all EU member states needed to be carefully evalu- ated as it could end up being ad- vantageous to some countries but not to others. "Malta remains committed to contribute to the process," he said. "In fact, Malta is a BEPS associate country and is fully co-operative in the international initiative against tax evasion." Bonello said that there were also parties within the European Parlia- ment – "notably the Greens" - who would not let any occasion slip by them if it could serve their declared mission against small EU member states like Malta, Switzerland and Ireland that have successfully man- aged to harness the EU fundamen- tal freedom of movement of capital and provision of services across the entire EU. Carmel Cacopardo, chairman of Alternattiva Demokratika, said that the fiscal rules permitting the refund of a substantial amount of tax paid by foreign owned compa- nies based in Malta is the reason for the current spotlight. "This refund effectively reduces the tax paid by such companies from 35% to 5 and is considered very attractive by a number of companies," he said. "The basic question which requires a clear answer is as to how many of these companies are letter-box compa- nies, that is companies which do not have any part of their opera- tions on Maltese soil." It would be reasonable, he said, to entice companies to base part of their operations in Malta and as a result make use of fiscal advan- tages. "But in respect of those com- panies which have not shifted to Malta any part of their operations, making use of the beneficial taxa- tion arrangements is unreasonable and unjust," Cacopardo insisted. He said the system was allowing such companies to avoid paying tax in the countries where they cre- ated their profits and consequently avoiding their social responsibili- ties on paying taxes in the coun- tries which were providing them with the very facilities which made it possible to create their wealth. "In a nutshell Malta is provid- ing these companies with the le- gal framework to avoid their tax responsibilities in the countries in which they operate through pay- ment of a fraction of these taxes to the Maltese Exchequer," Cacopar- do said. Tax avoidance But Farrugia was emphatic when asked if Malta could be considered an accomplice in tax avoidance. "Absolutely not the case," he said. "Malta has in place a long-stated position that sees it strongly com- mitted to the international stand- ards of transparency and effective exchange information via a broad network of exchange of informa- tion in- s t r u - m e n t s with a significant n u m b e r of jurisdic- tions." He said that Mal- ta's public registry was open for scru- tiny by anyone and any relevant da- ta could be directly obtained from the Registry of Companies. In 2013, the OECD had con- firmed that the Maltese authorities have broad access to information for exchange of information pur- poses pursuant to income tax laws, including bank and accounting in- formation, stressing that "adequate rights and safeguards are in place to guarantee an effective exchange of information". "It is also important to point out that Malta fully applies EU law and all OECD initiatives on combatting tax evasion including the directives on mutual assistance between tax authorities, automatic exchange of 13 2 4 3 16 3 4 15 12 The 17 countries on the EU tax haven blacklist: 1. American Samoa 2. Bahrain 3. Barbados 4. Grenada 5. Guam 6. South Korea 7. Macao 8. Marshall Islands 9. Mongolia 10. Namibia 11. Palau 12. Panama 13. Saint Lucia 14. Samoa 15. Trinidad and Tobago 16. Tunisia 17. United Arab Emirates The 4 countries that the S&D Group wanted added to the blacklist: 1. Malta 2. Netherlands 3. Luxembourg 4. Ireland EP VOTE ON MALTA AS TAX HAVEN Malta's high profile and dwindling reputation attracted EU scrutiny News Carmel Cacopardo Kenneth Farrugia