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Malta should set its own ethical standards and get its act together

Rightly or wrongly, Malta has gained a reputation for notoriety in the international financial services/tax-hopping industry. The fact that we are not alone in this predicament is very poor consolation indeed

16 November 2017, 7:00am
Malta's rule of law has been debated twice thus far, with European Parliament coming together in Strasbourg on Tuesda, to discuss politically exposed persons involved in the Panama Papers as well as the lack of investigation into leaked FIAU reports.

Yesterday, the European Parliament debated the rule of law in Malta: a discussion that was precipitated by last month’s assassination of journalist Daphne Caruana Galizia. This is the second time the rule of law in Malta is being debated; the first was last June, following the Panama Papers allegations.

A resolution is expected to be co-signed later today, with the vote expected to pass with a comfortable majority. The resolution concerns politically exposed persons and their involvement in the Panama Papers, as well as the lack of investigations into the leaked FIAU reports.  MEPs are also expected to call on the European Commission to launch an investigation to discover whether Malta is compliant with anti-money laundering directives.

But if this resolution reflects the spirit of yesterday’s debate, it will most likely be less condemnatory towards Malta than many seem to expect... or, for that matter, than many people seem to want.

Naturally, there were many and various contributions: some less flattering than others. Malta stood accused of, among other things, being ‘governed by a criminal gang’; one MEP even demanded that the European Socialists expel the Labour Party from its ranks.

But elsewhere, the tone was more one of sober reflection of the state of the EU as a whole. Stelios Kouloglou, of the ‘Europe United Left’, came close to expressing a common thread with the words: “We don’t have to use Malta as a scapegoat to cover up our mistakes. Is Malta the only EU tax haven? The only country that facilitates tax evasion in the EU? That facilitates money laundering? All these phenomena are producing corruption, and corruption produces violence and crime. If we want to avoid crime, we must establish EU laws against tax evasions, tax havens, and money laundering. Stop the crocodile tears.”

This sentiment was echoed by Frans Timmermans, European Commission for the Rule of Law. “On the sale of passports, Malta is not the only member state that has that scheme – other member states have permanent residency for people who invest. In our 2018 report on this, we will describe the EC’s actions in this area and provide some guidance. We are working on this report right now. Member states should use their prerogative on citizenship in line with their EU obligations and in sincere cooperation with other member states.”

It is, of course, regrettable that it had to be Malta, of all member states, to kick-start this realisation. It could all also have been completed, avoided had the Maltese government taken the appropriate steps at the time of the Panama Papers scandal last year... or if the Maltese police, public prosecution and financial regulatory authorities did their job of investigating the government properly.

From this perspective, the outrage and indignation of those defending Malta – in and outside the EP - sounds a little hollow. It may be true that the EU is being hypocritical, for singling out Malta over a problem that many other members states are equally guilty of. But that does not mean the problem does not exist. Rightly or wrongly, Malta has gained a reputation for notoriety in the international financial services/tax-hopping industry. The fact that we are not alone in this predicament is very poor consolation indeed.

But it is also true that all this notoriety is associated more with the international financial services industry itself – or at least, that part of it that is used to hide wealth from tax or criminal authorities – than with the individual countries who exploit the demand for such services. Malta certainly has to act – and act fast – to clean up its international reputation; but unless the EU, as a whole, formulates a proper strategy to combat fiscal crime, which is implemented with equal vigour across the entire union – it is useless to feign shock and horror about the excesses of any one member state. 

So just as it is incumbent on Malta to get its act together, it is also incumbent on the European Union to come up with proper legalisation to address tax loopholes across the system. Otherwise, its critics will be justified in their argument that the European parliament only ever ‘talks big’ with the smallest and most easily pressured countries.

It was, therefore, heartening to observe that the EP is slowly coming round to this line of reasoning. It is also perfectly reasonable to expect Malta to be exposed to greater international scrutiny under the present circumstances. It remains scandalous – and deeply suspicious - that the FIAU reports were never properly investigated. How could Malta expect such a glaring omission to be overlooked by the European parliament... especially after the murder of the high-profile journalist who had exposed so many of Malta’s darker secrets?

Ultimately, however, it is disappointing and humiliating that we had to be told these things on the international stage, for all to see. The issues brought up in Tuesday's debate – transparency, accountability, a functional institutional infrastructure – these are all the cornerstones of the rule of law. As such, we should be investing all our energies in seeing that they are reformed and strengthened... without having to be told by others.

DealToday
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