The budget: beyond the €s

Liza Minelli’s song “Money makes the world go round” is the underlying theme of the Budget speech delivered by Finance Minister in Parliament last Monday. The message driven home was that money and the accompanying affluence clearly indicate that we have never had it so good and that handouts to all are not a problem, both to those who need them, and, more importantly to those who don’t.

Today, taxation is a dirty word in our political lexicon: hence, it was suggested that the message that no increases in existent taxes or new taxes have been proposed is a positive one by the Honourable Minister. Handouts are for all, almost. First for those in need, secondly for most of the rest. The dictum “from each according to his means, to each according to his needs” no longer has any significance when trying to understand the political philosophy underlying the budget of this “labour” government.

Taxation collected in Malta apparently only has some significance when taxing foreign companies operating outside Maltese territory but having some small office, or just a letterbox, on this rock. This is done so that they can avail themselves of reduced taxation rates, substantially lower that those payable in the countries where they operate.

Similarly, companies operating in the financial services sector benefit from a tax package which offers them substantial savings on their tax bills in order to entice them to set up shop.

The government thinks it is smart, but all it is doing is encouraging tax avoidance. Malta’s message is clear: those who want to avoid tax in their country are welcome as long as they are prepared to pay a small part of the taxes avoided to the Maltese exchequer.

In this respect, the case study entitled “Toxic Tax Deals. When BASF’s Tax Structure is more about style than substance” published by the Green Group in the European Parliament around two years ago is indicative. In that study, it was concluded that BASF, the German chemical giant with its headquarters in Ludwigshafen, used mismatches in national tax systems in order to avoid paying its taxes. It is estimated that, over a five-year period spanning 2010 to 2014, BASF avoided the payment of close to one billion euros in taxes, paying instead a small amount of the taxes avoided, in gratitude for this wonderful opportunity made possible by the Maltese governments, blue and red.

In this context the Finance Minister’s declaration against tax evasion, tax avoidance and money laundering is deemed mere rhetoric. It has to be viewed in the context of the Panama Papers saga, as well as the established fact that a Cabinet Minister and the Chief of Staff in the Office of the Prime Minister set up companies in Panama, a tax haven, and no punitive action was taken against them. With this background, the Minister’s sanctimonious declaration is in no way credible.

The Budget proposals strengthen the social safety net as it assists the vulnerable financially. However, the quality of life is not measured solely by financial metrics. The Budget has various green gaps that affect our quality of life.

The welfare of cars assumes an importance over human quality of life, as government considers it is important to widen and improve roads in order to facilitate the passage of cars, thereby aiming at reducing congestion. An inverted sense of logic: reduction of the number of cars on our roads should have been the target as that is the real and actual problem. Widening roads and improving road infrastructure with flyovers and underpasses only serves to grow the number of cars on our roads, thereby increasing the problem. Providing and facilitating alternative transport is the only solution. Paying lip service to alternative means of transport but simultaneously financing an exponential
increase of the problem signifies that we still have to learn the ABC of transport policy.

The government’s own transport master-plan places considerable emphasis on the need to reduce cars from our roads but it seems that the government is not interested.

Therefore, we have a government which is more interested in the welfare of cars than in our quality of life.

This is just one example. There are countless of others.

The Budget loses an opportunity to make a lasting difference in a number of areas important for our quality of life that goes beyond finances.

published (online) at Malta Independent

Il-baġit : lil hinn mill-€s

Id-diska ta’ Liza Minelli “Money makes the world go round” donnha li hi t-tema li madwarha hu minsuġ id-diskors tal-Baġit li nqara mill-Ministru tal-Finanzi nhar it-Tnejn fil-Parlament. Il-messaġġ ċar li wasal fi djarna kien li l-flus u l-“ġid” li hawn jagħmlu possibli li tirċievi ċekk id-dar, kemm jekk għandek bżonnu kif ukoll jekk m’għandekx.

F’dawn iż-żmienijiet il-kelma taxxa donna saret kelma moqżieża fid-dizzjunarju politiku: għalhekk ġie suġġerit li n-nuqqas ta’ taxxi ġodda, inkella ta’ żieda fit-taxxi eżistenti kien element pożittiv fid-diskors tal-Onorevoli Ministru. Ċekkijiet għal kważi kulħadd. L-ewwel għal dawk li għandhom il-ħtieġa u mbagħad għall-parti l-kbira tal-bqija. Dak li kien jingħad li “jittieħed mingħand kull wieħed skont ma jiflaħ, u jingħata lil kulħadd skont il-ħtiġijiet tiegħu” donnu li ma għandu l-ebda piz illum meta nippruvaw nifhmu l-filosofija politika li fuqha hu mfassal dan il-baġit ta’ Gvern “Laburista”.

It-taxxa li tinġabar f’Malta donnha li hi utli biss meta tinġabar mingħand kumpaniji barranin li fil-waqt li joperaw barra mit-teritorju Malti jkollhom uffiċċju żgħir jew sempliċi letterbox f’Malta. Dan biex ikunu jistgħu jibbenefikaw minn rati ta’ taxxa sostanzjalment iktar baxxi minn dawk li jkunu soġġetti għalihom fil-pajjiżi fejn joperaw.

Diversi kumpaniji fis-settur tas-servizzi finanzjarji ukoll jibbenefikaw minn rati ta’ taxxa li bihom jiffrankaw sostanzjalment minn dak li jħallsu band’oħra.

Il-Gvern mingħalih li għamel opra. Fir-realtá qed jibgħat messaġġ li Malta tilqa’ li min irid jevadi t-taxxa f’pajjiżu, kemm-il darba jkun lest li jħalli xi ħaġa minn dak li jiffranka fil-kaxxa ta’ Malta!

F’dan il-kuntest l-istudju intitolat Toxic Tax Deals. When BASF’s Tax Structure is more about style than substance. ippubblikat mill-Grupp tal-Ħodor fil-Parlament Ewropew madwar sentejn ilu jispjega b’mod ċar x’inhu jiġri. F’dan l-istudju ġie konkluż li l-BASF, ġgant Ġermaniz fil-qasam tal-industrija kimika ibbazat f’Ludwigshafen, jagħmel użu minn differenzi fis-sitemi nazzjonali tat-taxxa biex jevita milli jħallas it-taxxi dovuti. Huwa stmat li, tul il-ħames snin bejn l-2010 u l-2014, BASF evitaw madwar biljun euro fi ħlas ta’ taxxi. Minflok ħallsu ammonti ferm inqas, b’ħajr lill-gvernijiet Maltin (blu u ħomor) talli għinhom jevitaw dawn it-taxxi kollha.

F’dan il-kuntest id-dikjarazzjoni tal-Ministru tal-Finanzi kontra l-evażjoni tat-taxxa u l-ħasil tal-flus jidhru dak li fil-fatt huma: eżerċizzju ta’ retorika. Inżommu f’moħħna ukoll il-kaz tal-Panama Papers, li kien stabilixxa l-fatt li membru tal-Kabinett u ċ-Chief of Staff fl-uffiċċju tal-Prim Ministru kellhom kumpaniji fil-Panama, pajjiż rinomat għall-evażjoni tat-taxxa, u dwar dan ma kienu ittieħdu l-ebda passi kontra tagħhom. Fid-dawl ta’ dan, id-dikjarazzjoni ta’ “qdusija” da parti tal-Onorevoli Ministru hi nieqsa minn kull kredibilitá.

Il-proposti tal-Baġit isaħħu ix-xibka soċjali u dan billi jgħinu finanzjarjament lill-vulnerabbli. Imma l-kwalitá tal-ħajja ma titkejjilx biss f’termini ta’ flus. Fil-Baġit hemm bosta miżuri ambjentali nofs leħja.

Il-ħarsien tal-karozzi huwa iktar importanti mill-kwalitá tal-ħajja għalina. Il-Gvern jikkunsidra li hu iktar importanti li jwessa’ t-toroq biex jiffaċilita ċ-ċaqlieq tal-karozzi u b’hekk jipprova jnaqqas il-konġestjoni. Loġika rasha l-isfel. Il-mira kellha tkun it-tnaqqis tal-karozzi mit-toroq tagħna għax dik hi l-problema. It-twessiegħ tat-toroq u t-titjib tal-infrastruttura bil-kostruzzjoni ta’ flyovers lil hawn u lil hemm iwassal biss għaż-żieda ta’ karozzi fit-toroq tagħna u b’hekk tikber il-problema tal-konġestjoni. L-unika soluzzjoni hi li jkun inkoraġġit bis-serjetá t-trasport alternattiv. Il-Gvern qiegħed fl-istess nifs jinkoraġixxi kemm lit-trasport alternattiv kif ukoll iż-żieda fenomenali ta’ karozzi: dan ifisser li għadu ma tgħallem xejn. Wara kollox huwa l-pjan nazzjonali tat-trasport imfassal minn dan il-Gvern stess li jpoġġi quddiemna l-mira tat-tnaqqis tal-karozzi mit-toroq tagħna. Imma jidher li l-Gvern qed iwarrab il-pjani tiegħu stess.

L-Gvern hu iktar interessat mill-ħarsien tal-karozzi milli mill-ħarsien tal-kwalitá tal-ħajja tagħna lkoll.

Dan hu biss eżempu wieħed. Hemm bosta oħrajn.

Il-Baġit qed jitlef l-oportunitá li jagħmel differenza f’numru ta’ oqsma fejn li troxx il-flus mhux biżżejjed.

 

Ippubblikat fuq Illum: Il-Ħadd 28 t’Ottubru 2018

Taming the residential rental market

The proposals in the White Paper entitled Renting as a Housing Alternative is a breath of fresh air in the long overdue debate on the need to regulate the rental market for residential property.

As rightly pointed out in the White Paper, the Maltese community has developed an allergy to local rent regulation as, when it existed, it was generally too rigid. It oscillated from strict over-protection of the tenant to absolutely no controls.

For a very long time, we also ended up with temporary legislative provisions enacted during the war which were over-stretched too long after their useful life. In effect, this reluctance over the years to introduce proper landlord and tenant legislation effectively killed off the rental market for a long time and it is only as a result of this fact that Malta is a nation of home-owners: it would not have developed in this way, had the post-war governments got their priorities right.

The proposals put forward by the White Paper are generally a good step forward. If properly implemented, they will go a long way towards laying the foundations for a stable residential rental market based on adequate (and necessary) protection of both landlords and tenants. A serious debate is, however essential in order to avoid creating unnecessary difficulties.

The rental market is currently in a state of anarchy, where the only applicable rules that apply are those of the jungle – where might is right – because, so far, the state has abdicated its duties to protect the vulnerable from the excesses of the market. Subject to the three exceptions listed in the White Paper (temporary foreign workers, tertiary education students and temporary leases for persons repairing and/or upgrading their own homes) establishing the period of one year as the minimum length of a residential lease addresses the abuse currently resulting from short-term leases. Likewise, establishing as a duty of landlords to give a suitable notice period of their intention not to renew a lease is right and proper. It is in everybody’s interest that everyone is aware of their rights and duties, as this will lead to better planning on all sides and, consequently, to a more stable and civil relationship between landlords and tenants.

It was also about time that the deposit requested on the signing of lease agreements are properly regulated – both as to the actual need for a deposit, its quantum and the circumstances in which it would be reasonable for it not to be refunded. This is a subject about which countless stories of actual abuse on the part of both landlords and tenants abound and regulation of it will bring some sense into the subject.

It is also right that variations to the rent to be paid during the period of the lease are properly regulated,  thereby defining the limits of permissibility. Too strict a limitation, however, will lead to a preponderance of short-term lease agreements because the market prefers frequent rental revisions that enable the rent payable to be as close as possible to the full market value.

Registering lease agreements is a step forward. It will not only lead to a check to  ensure that agreements comply with the new legislation but will also have the potential to ensure that tax evasion associated with rent paid is history.

When considering the White Paper’s proposals, one should avoid introducing unnecessary exceptions as these will only serve to stultify the objective of the exercise: the development of a stable rental market for residential properties. In particular, the proposal in the White Paper to justify the premature determination of a lease agreement, when a landlord needs the property for his own use or in order to sell with vacant possession or else to redevelop it, is uncalled for. Given that the residential leases in question will most probably be short-term leases anyway (between one and five years) no harm will be done to anyone if the landlord patiently awaits until the end of the lease before taking back possession.

The current proposals, with the one exception referred to above, are an essential next step to help the residential rental market develop properly. On their own, however, they are insufficient because they must be supported by a Housing Authority that proactively addresses the needs of the vulnerable when facing the market, which is eager to fleece those who meekly submit themselves as they see no way of becoming homeowners!

 

published in The Malta Independent on Sunday – 22 October 2018

Undermining the rule of law

The “rule of law” is a basic democratic principle codified in the laws of democratic countries.

We are all servants of the law in order to be free and in a democracy, the law should apply to one and all without exception. A weak “rule of law” thus results in less and less democracy until one is left with only a free-standing façade.

The law is there to be observed: it should be a constraint on the behaviour of individuals as well as on that of institutions. All individuals ought to be subject to the same laws, whereas institutions are there to protect us all, not just from ourselves but also from all possible attempted abuse of authority by the institutions themselves.

It is within this context that the report of the ad hoc delegation of the Committee of Civil Liberties, Justice and Home Affairs of the European Parliament has to be considered. The report is an illustration of how others see the state of our democracy, even though at points it may be inaccurate.

The delegation’s brief was to investigate “alleged contraventions and maladministration in the application of Union law in relation to money laundering, tax avoidance and tax evasion”.

The observations and conclusions of the delegation in its 36-page report are certainly not edifying. The common thread running through the different pages of the report is that in Malta there are more masters of the law than servants; this is how others see us.

In my opinion they are not far off the mark. The report repeatedly emphasises the point that the law should be observed in both letter and spirit.

The institutions in Malta are very weak. I would add that they are weak by design, in other words they are designed specifically to genuflect when confronted by crude political power. This is reflected both in the type of appointees as well as in the actual set-up of the institutions which are supposedly there to protect us.

The above-mentioned report observes, for example, that none of the Financial Intelligence Analysis Unit (FIAU) reports on Maltese politically exposed persons (PEPs) were investigated by the Police, notwithstanding the fact that the said reports had been forwarded to them “for any action the Police may consider appropriate”.

Is it too much to expect that the police do their duty in at least investigating? The fact that no such investigation was carried out drives home the clear unequivocal message that for the police, PEPs are not subject to the law like any other person. The EU Parliament report is very clear as to why such investigations are essential. In fact it is stated that: “Persons perceived to be implicated in serious acts of corruption and money- laundering, as a result of Panama Papers revelations and FIAU reports, should not be kept in public office and must be swiftly and formally investigated and brought to justice. Keeping them in office affects the credibility of the Government, fuels the perception of impunity and may result in further damage to State interests by enabling the continuation of criminal activity.”

The question to be asked is: why is this possible? Why do Maltese authorities tend to bend the rules or close an eye here and there?

You may find an indication as to why this is so in two small incidents occurring in Malta this year. These illustrate the forma mentis of the Maltese “authorities”.

The first example is associated with the fireworks factory at Iż-Żebbiegħ. After 30 years in Court the rural community of iż-Żebbiegħ won a civil case as a result of which a permit for a fireworks factory was declared null and void by the Court of Appeal. The government reacted by rushing through Parliament amendments to the Explosives Ordinance. These amendments with approved by Parliament with the full support of the Opposition. As a result, notwithstanding the decision of the Court of Appeal, a permit for the fireworks factory can still be issued.

The second example is still “work in progress”. The Court of Appeal has, in the application of rent legislation, decided that the Antoine de Paule Band Club in Paola was in breach of its lease agreement. As a result the Court of Appeal ordered the eviction of the band club from the premises they leased within four months.

The government reacted by publishing proposed amendments to the Civil Code, as a result of which the eviction ordered by the Court of Appeal will be blocked.

These are two examples of the government reacting to decisions of our Courts of Law by moving the goalposts – with the direct involvement of the Opposition. The public reactions to these two cases have been minimal. Maltese public opinion has become immune to such “cheating” and bending of the rules because this method of operation has become an integral part of the way in which our institutions function. The Opposition is an active collaborator in this exercise that undermines the rule of law in Malta.

Is it therefore reasonable to be surprised if this “cheating” and bending of the rules is applied not just in minor matters but in very serious ones too? Moving the goalposts whenever it is politically expedient is, unfortunately, part of the way in which this country has operated to date. It is certainly anything but democratic and most obviously anything but respectful towards the rule of law.

published in The Malta Independent on Sunday : 20 May 2018

Pilatu fid-dawl tax-xemx

L-istorja dwar Egrant Inc. ilha sena fl-aħbarijiet. Ilha tinħema 4 snin minn ftit wara l-elezzjoni ġenerali tal-2013 meta twaqqfet flimkien ma kumpaniji oħra.

L-ewwel kellna lil Konrad Mizzi bil-kumpanija tiegħu Hearnville Inc.. Ftit wara Keith Schembri bil-Kumpanija tiegħu Tillgate Inc.. Ħin minnhom daħal fl-istorja Adrian Hillmann tat-Times of Malta ma kumpaniji oħra fil-Panama u fpostijiet oħra. Hillmann kien l-uniku wieħed sissa li irriżenja (jew ġie mġiegħel jirriżenja).

L-istorja, kif bla dubju tiftakru, saret waħda pubblika wara li nkixfu l-Panama Papers. Miljuni ta dokumenti sigrieti dwar diversi kumpaniji imwaqqfa minn persuni pubbliċi u privati madwar id-dinja kollha ma baqawx iktar sigrieti. Inkixfu u tperrċu mal-erbat irjieħ tad-dinja.

Il-qalba tal-problema mhiex il-ħolqien tal-kumpaniji imma l-iskop li għalih dawn jitwaqqfu. Kumpaniji sigrieti, kif għidt fartiklu ieħor ma jinħolqux biex fihom jitfaddlu d-domni jew is-santi. Dawn il-kumpaniji jitwaqqfu biex fihom jinħbew flejjes u assi oħra min għajnejn l-awtoritajiet. Dan il-ħabi jsir għal żewġ raġunijiet : biex ikun evitat il-ħlas tat-taxxi, u/jew biex jinħeba l-frott tal-korruzzjoni.

Iddur kif iddur, il-politiku u dawk ta madwaru qatt ma jistgħu jiġġustifikaw il-ħolqien ta dawn il-kumpaniji. Għax dawn ġeneralment  ifissru involviment fil-korruzzjoni inkella fl-evażjoni tat-taxxa. Għalhekk il-polemika.

Tnejn mill-kumpaniji ilna nafu ta min huma. Ta Konrad Mizzi u ta Keith Schembri. Inkixfu kmieni u kien għadu ma sar l-ebda użu minnhom, skond kif kien intqal dakinnhar. Kienet inkixfet korrispondenza dwar il-possibilitá ta ftuħ ta kontijiet ma diversi banek. Kien hemm diversi tweġibiet kompromettenti li, iżda, Konrad Mizzi u Keith Schembri dejjem ċaħdu li kellhom xjaqsmu magħhom jew inkella li kienu inħarġu fuq struzzjoniiet tagħhom. Ftit kienu twemmnu.

Il-polemika baqgħet għaddejja u l-attenzjoni ċċaqalqet lejn it-tielet kumpanija : Egrant Inc. Ta min kienet din?

Niftakru li imkien fil-Panama Papers ma kien hemm l-iċken informazzjoni dwar is-sid jew is-sidien ta Egrant Inc, għax kien intqal li din l-informazzjoni kienet ser tgħaddi bil-fomm fuq Skype. Il-messaġġ kien ċar, mill-ewwel, li l-probabbiltá kbira kienet li kien hemm xi persuna jew persuni importanti ħafna involuti. Importanti iktar minn Konrad Mizzi u Keith Schembri, jiġifieri.  Ma kienx hemm lok għall-immaġinazzjoni. L-ismijiet possibli kienu limitati ħafna u l-ismijiet probabbli kienu fuq fomm kulħadd!  In-nies ilhom jitkellmu dwarhom!

Nhar il-Ħamis infetaħ kapitlu ieħor. Fuq il-blog tagħha Daphne Caruana Galizia irreferiet għall- dokumenti li skonta qegħdin fis-safe tal-Pilatus Bank u li minnhom jirriżulta li l-kumpanija Egrant Inc hi ta Michelle Muscat u li din il-kumpanija irċeviet diversi flejjes mill-Azerbajġan, l-ikbar waħda minnhom somma ta $1.017 miljun li waslet mingħand bint Aliyev. Mil-livell ta dettall ippubblikat hu ċar li d-dokumenti interni tal-bank huma s-sors tal-istorja. Il-Ġimgħa fil-għaxija ġiet ippubblikata informazzjoni dwar ċertifikat taisħma fliema ċertifikat qed jingħad li l-kumpaniji Dubro Limited S.A. u Aliator S.A. għandhom fidejhom ishma tal-kumpanija Egrant u dan fisem is-Sinjura Michelle Muscat. Imma d-dokumenti infushom li minnhom qed ikun ikkwotat sissa għadhom mhumiex ippubblikati. Ma nafx għaliex.  Hemm bżonn li jinħarġu għad-dawl tax-xemx id-dokumenti kollha li fuqhom hi ibbażata l-istorja. Dan hu neċessarju għax dak li qed jingħad hu ikkontestat.

Għalkemm din l-istorja ilha tinħass ġejja, xorta meta ġiet tinħass iebsa ħafna. Hi ta gravitá kbira u tista tkun dak li  jispjega l-għaliex Konrad Mizzi u Keith Schembri ma tkeċċewx is-sena l-oħra meta ħarġet l-aħbar li kellkom il-kumpaniji sigrieti.

TaPilatus caħdu kollox, bħalma għamlu tan-Nexia BT u ovvjament Joseph u Michelle Muscat.

Bosta huma konvinti mill-veraċitá tal-istorja. Imma li tkun moralment konvint li l-istorja hi korretta mhux biżżejjed. Din l-istorja teħtieġ il-konferma li tiġi mill-provi tad-dokumenti u mhux mid-dimostrazzjonijiet. Għax fuq id-dokumenti hi mibnija. Allura hemm obbligu li dawn id-dokumenti tant bażiċi jaraw id-dawl tax-xemx.

Ippubblikat fuq Illum : 23 t’April 2017

 

 

 

Spotlight on Pilatus Bank

 

The Egrant Inc. story has been in the news for the past year: it has been developing for over the four years since the 2013 general elections, when it was set up together with other companies.

First we had Konrad Mizzi with his company Hearnville Inc. Then we had Keith Schembri with his company, Tillgate Inc. The matter became public when the Panama Papers were disclosed. Millions of hitherto secret documents about companies set up by public and private individuals all around the globe were made public. 

The core of the issue is not the setting up of the companies but the objectives for which they were set up. Secret companies are normally set up for the concealment of financial and other assets in order to avoid the taxman or to conceal the fruits of corruption.

The owners of two of the companies are already known. One of them is Minister Konrad Mizzi while the other is the Prime Ministers Chief of Staff Keith Schembri. Their identity was disclosed over 12 months ago, when it was declared that their Panama companies had not yet been put to use. When the Panama Papers were published it became known that correspondence with several banks had been exchanged relative to the opening of bank accounts for the said companies. Requests and commitments were spotlighted but Konrad Mizzi and Keith Schembri disclaimed any association with this correspondence and commitments identified.  No one believed them then.

The polemic went on and the focus shifted towards the third company: Egrant Inc. Who was its ultimate beneficial owner?

We should remember that the Panama Papers did not shed any light on the identity of the owner or owners of Egrant Inc. because this information was never communicated in a written manner: it was communicated over Skype. The message conveyed was immediately clear that in all probability some big-head was involved and that he or she was more important than Konrad Mizzi or Keith Schembri.  There was no room for imagination as the possible names were limited in number with the actual names being on the tip of everyones tongue.

On Thursday, a new chapter was opened. Daphne Caruana Galizia, on her blog, referred to documents that she said were in the safe of Pilatus Bank. These documents identified Michelle Muscat as the ultimate beneficial owner of the company Egrant Inc. It was also stated that this company received money transfers from Azerbaijan, including the sum of $1.017 million on the instructions of the daughter of Azerbaijan’s President Ilham Aliyev.  

The level of detail described by Daphne Caruana Galizias blogpost indicates very clearly that this was based on the contents of bank documents. On Friday evening, additional information relating to a certificate of trust was published. This information, the validity of which was contested by Joseph Muscat, states that the company Dubro Limited S.A. and Aliator S.A.  hold shares in the company Egrant Inc. on behalf of Mrs Michelle Muscat.  But the documents from which this information is being extracted are still unpublished.  I do not know why this is so. It is necessary that these documents, fundamental to the issue under consideration, see the light of day. This is essential because the information published is being contested.  

The information published is serious stuff. It may be the reason why Konrad Mizzi and Keith Schembri were not dismissed from office last year when the Panama Papers were published.

Pilatus Bank, Nexia BT, Joseph and Michelle Muscat have denied the published information.  Many are  convinced on the veracity of the story, but being morally convinced is not sufficient. Proof only results from authentic documentation but certainly not from demonstrations. It is for this reason that the full disclosure of all the documentation on which the published information is based is an essential  prerequisite.

published in The Malta Independent on Sunday – 23 April 2017

Tax avoidance: does Malta play a role?

basf-malta

On 30 August, the European Union, through Competition Commissioner Margrethe Vestager, ordered Apple Corporation to pay €13 billion in unpaid taxes to the Irish state.  The EU ruling considered that the special tax treatment of Apple, whose tax bill was substantially reduced, amounted to unlawful state aid.

In November 2014, through Luxleaks, we learnt of tax avoidance schemes in Luxembourg and elsewhere, as a result of which billions of euros in tax were being avoided by multinational corporations.

The EU has subsequently launched various investigations into the favourable tax treatment which Luxembourg, The Netherlands and Belgium have granted to various multinationals.

As a contribution to the on-going debate on tax avoidance in the EU, the Green Group in the European Parliament has recently published a study on the tax avoidance strategies adopted by the industrial giant BASF, the largest chemical company in the world.

Founded in 1865, BASF has its headquarters in Ludwigshafen, Germany, from where it manages a €70.4 billion turnover with production sites in 80 countries.

Malta features in this report together with Belgium, the Netherlands and Switzerland.

Over the years, BASF has used mismatches in national tax systems in order to avoid paying its taxes. It is estimated that, over a five-year period spanning 2010 to 2014, BASF avoided the payment of close to one billion euros in taxes.

Chapter VIII of the report, published by the Green Group in the European Parliament, deals with Malta. It refers to the existence of a BASF subsidiary in Malta which held €5.07 billion in assets. These assets where transferred to a new German subsidiary, BASF Finance Malta GMBH, which was managed from an office in St Julian’s, thereby creating the eligibility for preferential tax treatment which could amount to as much as a refund of six-sevenths of all tax payable in Malta.

All this is a clearly planned movement of profits through generous loopholes as a way of avoiding most of, if not all, of the taxation which would be due under normal circumstances.

This abuse of the differences in national tax systems needs to be addressed urgently. As rightly stated by Malta’s Finance Minister Edward Scicluna at a Luxembourg ECOFIN meeting last September, the way forward lies in coordination at an EU level and not in the harmonisation of the national taxation systems, as some EU member states are insisting.

Tax competition has a role to play as an important tool that small and peripheral countries in the EU have at their disposal. No one should expect these countries to throw away the small advantage they have, but it should be clear that this should be used responsibly and in no way should it buttress the urge of multinationals to circumvent the national taxation system where their profits are generated.

Profits should be taxed where they are actually generated and not elsewhere. The EU needs to end – once and for all – not only tax evasion but also tax avoidance resulting from loopholes in national tax rules. For this to happen, the member states must not only be vigilant, but must also refrain from encouraging tax avoidance through the creation of more loopholes.

Tackling tax evasion and tax avoidance seriously will mean that taxes are paid where they are due, thereby funding the services and infrastructure that is required in a modern, civilised society. This can only happen if more companies pay their dues. Tax competition need not be a race to the bottom.

published in The Malta Independent on Sunday – 4 December 2016

From toxic waste to iGaming

housecardsfall

 

It is a well known fact that the underworld on the Italian peninsula controls vast stretches of the Italian economy.

Some readers would remember the underworld’s waste-management activity that ended in the sinking of some 42 ships laden with toxic and/or hazardous waste throughout the Mediterranean. This was well known to environmentalists but confirmed during the Palermo maxi-processo, when Mafia turncoat Francesco Fonti gave evidence identifying the location of one such sunken ship, the Kunsky, loaded with 120 barrels of toxic waste, just off the Calabrian coast.

This network of organised environmental crime is so vast that, at one time, it also dumped toxic, hazardous and nuclear waste in Somalia. The warlords in the Somalia civil war were partly financed by the Italian underworld, which supplied them with arms in return for their consent to the dumping of the toxic, hazardous and nuclear waste in Somalia. Rai Tre’s investigative journalist Ilaria Alpi and her cameraman Miran Hrovatin were murdered in Mogadishu after having successfully tracked down the toxic shipments.

In early 2008 it was identified that buffalo mozzarella originating from some 83 dairy farms in an area near Naples was tainted with dioxin. The buffalo were grazing in an area where the Mafia was controlling the dumping of toxic waste  containing dioxin. When ingested through food dioxin can cause birth defects and organ failure in mammals. Large quantities of buffalo mozzarella tainted with dioxin were withdrawn from the market.

Carmine Schiavone, another Mafia turncoat, spilled the beans on more dumping of toxic and hazardous waste by the Mafia in the Naples area, in particular in the area around Casale di Principe. It has been reported that the incidence of cancer in these areas has skyrocketed as a result of the dumping contaminating the water table.

It is estimated that the underworld has garnered some €20 billion a year in the last few years from its illicit dealings in waste. Add to this the billions from its drug dealings, estimated at another €20 billion annually and you can clearly understand the Mafia’s need to launder huge sums of money.

Two specific areas seem to have been selected for this purpose. One such area was an investment in wind-farms in Sicily. Wheeling and dealing in the Sicilian wind farms was a certain Gaetano Buglisi who, for a time, made use of Malta’s fiduciary services by hiding behind their corporate veil. Last February the Italian Courts sentenced him to three years in jail as well as a substantial fine on finding him guilty of tax evasion.

It is within this context that one should try to understand the iGaming saga in Malta.

In the last few days the Malta Gaming Authority (MGA) has suspended the operating licences of a number of iGaming operators. Until the time of writing, six operators have been suspended, namely : Uniq Group Limited (Betuniq), Betsolution4U Limited, Alibaba Casino Limited, Soft Casino Limited,   Fenplay Limited and Soft Bet Limited . The MGA did not act on its own initiative but at the request of Italian law enforcement agencies.

In a press release, the MGA stated these licences had been suspended “further to investigations and arrests carried out by the Italian law enforcement authorities in collaboration with the Maltese police. The MGA is providing full support to the relevant authorities so that Malta’s reputation as a gaming jurisdiction of excellence is kept free from crime and money laundering. The MGA is also alerting counterpart regulators in other EU jurisdictions about this case.”

In a further press release issued on 25 July it was stated  “At the time of application (according to the MGA’s records), in line with standard procedures, all directors, shareholders, senior managers and ultimate beneficiary owners of these companies have been screened through MGA’s systems and protocols, using probity tools and national and international contacts and organisations. This forms part of the probity checks conducted at pre-licensing stage and before the actual business model of the gaming operation in question is screened and other control systems are checked and approved. The licensing process also includes independent audits, such as system and compliance audits which are carried out by approved external auditors.”

It seems that the due diligence carried out in Malta is no match for the underworld. It is possibly a case of amateurs trying to keep professionals in check.

On Thursday, Finance Minister Edward Scicluna stated that a review of due diligence procedures will be undertaken and changes will be put in place if  required. As a start, he should consider embedding complete transparency in iGaming. Hiding the identity of iGaming operators should be discontinued by emending legislation and discontinuing fiduciary services. This corporate veil is unfortunately being used as a tool by the underworld. As a nation we could do better if we make an effort to keep organised crime as far away from Malta’s economic activities as possible. It is pertinent to ask: how many iGaming jobs in Malta depend on Mafia linked operators.

published in The Malta Independent on Sunday, 2 August 2015

On this blog on the same subject one can view the following :

2009 The eco-threat of the Italian Mafia.

2013 On Malta’s Northern doorstep: the Mafia contaminates Southern Italy with millions of tonnes of toxic and nuclear waste.

2013 Ecocide in the Mediterranean. The known consequences so far.

2013 Schiavone’s secrets on eco-mafia operations: when will Malta’s government speak up.

Il-miljuni ta’ Ninu minn fejn ġew?

Ninu Zammit                          dollars

Mela issa, kif qaltilna l-Malta Independent on Sunday nafu li fil-kont li kellu fl-Isvizzera Ninu kellu $3.2 miljuni mġemma’ fih.

Ninu għamel użu mill-amnestija skond l-iskema tar-reġistrazzjoni tal-investimenti tal-2014 biex irregolarizza l-posizzjoni tiegħu. Biex setgħet saret din ir-reġistrazzjoni tal-investiment ta’ $3.2 miljuni li Ninu kellu l-Isvizzera, il-Bank Ċentrali ta’ Malta u/jew l-aġenti tiegħu għamlu dik li tissejjaħ due diligence. Jiġifieri staqsew lil Ninu l-mistoqsijiet u talbuh ukoll provi permezz ta’ dokumenti biex jistabilixxu l-oriġini ta’ dawn il-fondi.

Fil-medja, Ninu qal li dawn l-investimenti oriġinaw minn dħul mhux dikjarat mill-professjoni tiegħu kif ukoll min-negozju ta’ artijiet. X’qal lill-Bank Ċentrali jew lill-aġenti tiegħu mhux magħruf għax l-informazzjoni li tkun inġabret ħadd ma għandu aċċess għaliha.

Il-mistoqsija li qed jistaqsi kulħadd hi dwar jekk il-Bank Ċentrali u/jew l-aġenti tiegħu staqsewx biżżejjed kif ukoll jekk għarblux lil Ninu biżżejjed biex jistabilixxu bla dubju minn fejn oriġinaw l-investimenti.

Kien għalhekk li l-bieraħ fi stqarrija għall-istampa, Alternattiva Demokratika, permezz ta’ Arnold Cassola, qalet li jkun għaqli li l-Awditur Ġenerali jinvestiga sewwa dak li għamel il-Bank Ċentrali u dan mhux biss fil-konfront ta’ Ninu Zammit imma ukoll fil-konfront ta’ kull minn għamel użu mill-iskema tar-reġistrazzjoni tal-investimenti fl-2014.

L-Awditur Ġenerali biss għandu l-awtorità li jagħmel dan. Meta l-Awditur Ġenerali jinvestiga, jkun jista’ jistabilixxi jekk l-investimenti mhux dikjarati ġewx verament minn dħul li dawk li applikaw għall-amnestija iddikjaraw. Inkella jekk kienx hemm dħul minn sorsi oħra, bħall korruzzjoni jew inkella ħasil ta’ flus ġejjin, per eżempju, min-negozju tad-droga.

Sakemm l-affarijiet jibqgħu sigrieta fil-Bank Ċentrali dejjem ser jibqa’ d-dubju dwar jekk il-Bank Ċentrali għafasx biżżejjed biex jassigura li l-informazzjoni li kellu kienitx dik korretta. Jekk issir il-verifika mill-uffiċċju tal-Awditur Ġenerali ikun hemm probabbilta’ ferm iktar li jkun stabilit jekk l-affarijiet sarux sewwa jew le.

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