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James Debono
The clock is ticking faster for those who have kept their monies under the mattress away from the gaze of the country’s fiscal authorities.
As Malta gears to adopt the Euro in January 2008, concern is growing on the economic impact of a sudden burst of money laundering, as more people seek to channel their undeclared monies into legitimate activities like property development, economist Professor Edward Scicluna warns.
Data compiled by Prof Scicluna shows that Malta has the highest amount of money in circulation per capita among the 12 new EU member states-an astounding EUR 2912 (Lm 1250) per person. This amount of cash outside the banks is three times the EU average – a mere EUR 869 per person, and more than twice that of Cyprus. Since 1999 the amount of money in circulation has been increasing at an average rate of Lm17 million per annum, despite a period of economic sluggishness during the same period.
But since last year Malta registered a first ever decrease of about Lm10 million. Scicluna estimates that this break in trend indicates that already about Lm 30 million liri have already been withdrawn from the system.
The decline coincided with the period following the Maltese government announcement of Malta’s bid to join the Euro by January 2008.
Converting vast amounts of money into the euro through financial institutions will surely not be an option for those who have kept money hidden from the fiscal authorities.
The law clearly states that credit institutions are obliged to enquire on “the provenance of any amount of any sum in excess of Lm 5000”. Banks are also obliged to enquire on the origins of series of structured transactions below Lm 5000.
This could lead many to seek to invest hidden monies into property development and other unobtrusive investments.
But Scicluna warns that this could have negative economic impacts, which the economy can do without at this point in time.
“These monies are now fuelling the current inflationary pressures, blowing up further the property bubble and encouraging property speculation, with its needless environmental damage and destruction of our towns and village cores, and leading to downward pressures on the Maltese Lira.”
The property boom and the inflation rate are now common knowledge. What is still hidden, but any seasoned observer can sniff out, is the increasing thirst for Euro currency whose value on the streets is tending to supersede the official rate of exchange, effectively devaluing our Maltese currency.
Scicluna thinks that the government has no other choice but to enact a scheme through which the vast amount of money in circulation is mopped up and safely channelled into schemes which do not harm the economy. Cyprus has already opted for a tax amnesty.
“The policy implications for the Government are obvious. Mop up these dangerous monies in time before they reek more havoc on the economy. It is never too late to act.”
jdebono@mediatoday.com.mt
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