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Millions transferred from UK banks to Channel Islands by Maltese tax evaders

By Kurt Sansone

The fears raised by an OECD imposition for countries to exchange information between themselves over bank deposits of their respective citizens has prompted Maltese investors who have money stashed in British banks to transfer the money to off-shore banks in Jersey, the Channel Islands.

Bank officials have indicated to MaltaToday that the money being transferred amounted to millions of pounds. This was being done in a bid to out-manoeuvre the OECD which also finds EU backing, proposal.

The EU proposal aims to attack tax evasion perpetrated by those who open bank accounts or other holdings outside their own country in order to benefit from low or zero taxation and evidently, to refrain from declaring the income in their home country.

Once the proposal comes into force banks would be obliged to share information with the fiscal authorities of the individual’s country.

The Maltese investors believe that transferring the funds to Jersey would enable them to continue benefiting from the tax holiday. Jersey is a UK dependency and under the UK's accession treaty with the EU, the island forms part of the single market but is outside the EU fiscal area.

However, the investors are being misled because the EU proposal is not yet in force and has not been agreed to. It will not be implemented unless non-EU financial centres such as Liechtenstein, San Marino, Switzerland and dependencies of EU countries such as the Channel Islands, agree on similar lines of action.

The condition for implementation was imposed by EU member-state, Luxembourg. In this little country banking secrecy has been used for decades to attract depositors. Luxembourg will lose out to rival non-EU financial centres if it adopts the proposal.

The timeframe for agreement is by the end of next year, however, given the tough conditions being imposed, EU pundits are questioning the likelihood that such a law would be approved. One must note that this measure will only be approved if all EU countries agree to it.

The complex scenario means that Maltese investors may still end up having to declare their deposits, whether these are in UK banks or off-shore in Jersey. The noose is tightening, albeit in a very slow manner. Even if Malta stays out of the EU and non-EU financial centres agree to yield to the proposal, the tax evaders will have no refuge.

At the end of the day it may pay off for Maltese ‘investors’ to bring the millions of pounds back into Maltese banks where they will pay a withholding tax of 15%.