Issue link: https://maltatoday.uberflip.com/i/939870
maltatoday SUNDAY 11 FEBRUARY 2018 9 PAUL COCKS MALTA'S top-20 billing in the Tax Justice Network's financial secrecy index has expectedly been met with scepticism by promoters of the island's tax system. Banker Kenneth Farrugia, who heads the private sector's lobby Finance Malta, said the FSI, which placed Malta in 20th position, had actually featured countries who openly criticise Malta's tax impu- tation system at a higher position. One of those countries is Germany. "I find it interesting that this index seems to vindicate the media hype and sensationalism surrounding claims that Malta is a tax haven," he said. "It is also very interesting that a number of jurisdictions who have often openly criticised Malta's tax imputation system, have placed higher than Malta." The FSI ranked jurisdictions ac- cording to their secrecy and the scale of their offshore financial ac- tivities. Malta was given a secrecy score of 61, computed as the average score of 20 key financial secrecy indica- tors (KFSI), including banking secrecy, trust and foundation reg- ister, corporate tax disclosure and public company accounts. The top 20 index was topped, unsurprisingly, by Switzerland and includes countries like the USA, Panama, Luxembourg, Cayman Islands, the British Virgin Islands and the Bahamas. But, in seventh place, it also in- cludes Germany, the most vocal critic of Malta's tax system and the country most often accused by de- fenders of the Maltese tax system of "bullying". Farrugia in fact called the FSI a positive report for Malta, in spite of the ranking, because it showcased the country's renewed commit- ment to legislative improvement. "Legislative reform is a slow and gradual process and cannot be car- ried out overnight. This index can provide an insight as to how we can further improve Malta's stand- ing as a reliable financial services centre." But Sven Giegold, a German member of the Green party in the European Parliament, did not agree. "Malta cannot continue trying to justify the theft of millions of Euros by large multi-nationals who make use of its tax imputation system, which favours foreign deposits but discriminates against the average working man and woman," he told MaltaToday. Giegold, an outspoken critic of Malta's tax imputation system, said that it was not enough for Malta to justify itself by saying that the sys- tem had been approved by the EU before the country joined the bloc in 2004. He argued that things had changed since then, and so had the political reality facing the EU. "Just because Malta's tax system was deemed acceptable back then, this does not mean that it should not be changed now," he said. "We have seen changes implemented in other instances, as in the case of Ireland's double taxation system with the Netherlands, which had been accepted but then had to be replaced." Transposition champion Malta, in the meantime, remains the country that takes the least time to transpose EU directives into legislation. Farrugia said that in 2016 Malta was the only country that had met the 0.5% target set by the European Commission on transposing single market di- rectives. "Such directives can only achieve their intended effects if they are completely and correctly transposed into member states' national law by the deadline set out in these directives. Transposi- tion monitoring helps to provide an overview of Member States' en- forcement performance." He said Malta had very stringent financial services regulations that, if anything, were often criticised as being too excessive in some cases, as in the level of due diligence car- ried out when opening bank ac- counts or transferring money into or out of the country. "Transparency is a hallmark of every successful financial system," Farrugia said. "Definitely, no one can say that Malta is a lethargic ju- risdiction or that we are not open to change and reform." But German MEP Sven Giegold said that he did not like the fact that Malta always went on the de- fensive when any larger country dared to criticise it. "Malta can no longer defend a system which many in Europe con- sider to be a form of robbery," he said. "This is a tool that aggressive- ly steals competition and money from other jurisdictions, through the low tax charged to large cor- porations, and it is not acceptable." Giegold insisted that there should be minimum standards accepted by all EU member states on a fair tax system that did not penalise anyone. Malta, he said, should remember that as an EU member state, it was also bound by a vow of sincere co- operation in the accession treaty. "The imputation system in Mal- ta is prone to abuse, and it is not enough for Malta to say that other countries should follow suit and lower the tax burden within their jurisdictions," Giegold said. "Having smaller countries play hardball and forcing others into a downward spiral would be unfair and that is why public opinion in countries like Germany and France is so critical of the Maltese system." The MEP also said that Malta's ranking in the secrecy index was not even down to its unfair impu- tation system. "Ultimately it was based on the fact that Malta remains the only country where serving members of government had been implicated in the Panama Papers scandal and, unexplainably, remain in office even today," he said. The failure to prosecute these individuals was also very worrying and had considerable weight on Malta's ranking, he said. pcocks@mediatoday.com.mt News Malta's tax system remains in the eye of a storm I find it interesting that this index seems to vindicate the media hype and sensationalism surrounding claims that Malta is a tax haven - Kenneth Farrugia Finance Malta This is a tool that aggressively steals competition and money from other jurisdictions, and it is not acceptable - Sven Giegold MEP (Greens)