Taking care of tax evaders

HSBC Geneve

 

Joseph Muscat and the Labour Party pride themselves with emphasising that this Government has removed the statutory limitation (prescription) relative to corruption when holders of political office are criminally prosecuted.

It certainly was a step in the right direction. It still however requires the test of time to verify whether it is compatible with the human rights provisions of our Constitution and the European Convention of Human Rights as was explained by former Strasbourg Judge Giovanni Bonello in his article Bribery and Genocide : the same? (Times of Malta April 20, 2013)

Such a clear stand against corruption contrasts with the provisions of Legal Notice 256 of 2014 entitled Investment Registration Scheme Regulations 2014 which launched the latest amnesty that can be utilised by Maltese citizens who evaded payment of income tax. Camouflaged through the use of Orwellian terminology as an “Investment Registration Scheme”, this amnesty, as others before it, did not treat holders of political office any differently from other tax evaders. It afforded them the same opportunities to be able to “regularise” their position absolving them from having committed an economic crime.

Apparently, this government considers tax evasion to be a crime which is substantially inferior to corruption. In fact, the recent cases brought to light by Swiss Leaks have revealed the ease with which former Cabinet Ministers have wriggled out of their tax evasion crimes that they had successfully concealed for around 40 years, including when in office.

During all these years, most of the funds which were accumulated in various bank accounts until they ended in an HSBC Genève account, reaped interest at varying rates depending on market conditions, which, as a result, increased the quantum of the undeclared funds. Had both the funds originally invested as well as the accumulated interests  been appropriately declared to the tax authorities in Malta , they would have been subject to between 35 per cent and 65 per cent  taxation in terms of Income Tax legislation. Yet the Investment Registration Scheme of 2014 allows self-confessed tax evaders off the hook subject to a  maximum 7.5 per cent registration fee! They even get a discount if they repatriate the funds! Apparently it pays to be a tax evader.

There are, however, some matters  which are not at all clear, yet.

Before insisting on his imaginary “right” not to be pestered by the press, former Minister Ninu Zammit had informed The Malta Independent on Sunday  that all his affairs were now “regularised”, having  made use of the 2014 amnesty to reap the benefits of his hoard stacked in Genève. He was also reported as having stated that the sources of his hoard was income derived from his professional activity  as well as various deals in landed property.

It is public knowledge that Zammit’s land deals were negotiated through the Malta registered limited liability company by the name of LENI Enterprises Limited of which he was both a shareholder and a director.  It is logical that any income from land deals would not only have a bearing on Ninu Zammit’s tax status but also on the reported performance and possible tax liabilities of LENI Enterprises Limited. In this respect, the  company’s financial reporting would certainly make very interesting reading.  Have its audited accounts been submitted to the Malta Financial Services Authority or its predecessors in terms of law?  Who has certified these accounts? What about the role of the auditors of LENI Enterprises Limited?  Is there the need to revisit the audited accounts of LENI Enterprises Limited due to the fact that at least one of its directors has benefited from the latest tax evasion amnesty?

As far as I am aware,  Legal Notice 256 of 2014 only absolves self-declared tax-evaders resident in Malta from their non-observance of income tax legislation. Other crimes could still be actionable .

Such other crimes would include false declarations to Cabinet in terms of the Ministerial Code of Ethics. There may also be other issues should these result from the investigations which the Commissioner of Inland Revenue is currently carrying out on the basis of the information which is now known.

There is however one important thing which we should never underestimate. The benevolence of the state towards tax evaders has no limits. It knows how to take care of these small details too.

 

published in the Malta Independent on Sunday – 1st March 2015

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