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Konrad Mizzi interviewed: minister says he will retain offshore company Panama run by trustees for his family’s trust in New Zealand, and insists he is doing nothing wrong by putting his assets offshore to be invested
29 February 2016, 6:40am
I think I would have had to resign if I hadn’t declared it. Everything I’m doing is legal, a perfectly legitimate structure. It was created in the summer of 2015 and I declared it at the first possible opportunity, and I’m more than happy to share the documents [of incorporation]. [Mizzi runs through an explanation on the incorporation of his foreign company-trust set-up].
This is a set-up that allows tax avoidance on a significant amount of wealth...
Because there is no tax on assets held in New Zealand offshore trusts if you don’t live there, and you employ a Panamanian company to administer it.
No I declared it proactively. It does not allow for tax avoidance. I am declaring it in Malta and I will pay tax in Malta on its full earnings.
On the earnings you repatriate in Malta, not on the full wealth you are parking offshore – because this is why you have created it.
No. I pay tax on my earnings. I declared it clearly. It has not as yet operated. All its earnings will be taxed.
That’s incorrect. It’s a family trust. I’ve worked overseas, my wife works overseas. We decided to go to New Zealand because it’s neither Malta nor China. It’s a reputable jurisdiction...
"I’m not avoiding tax, I’m not breaking any laws. [UK prime minister] David Cameron’s family trust has utilised Panama as well"
I’ll come to that... we own an overseas property and one in Malta; I have an amount of cash in Malta that I want invested properly through a proper setup. The beneficiaries are my family. And I think I have every right to structure it in that way.
Why not Malta? HSBC has sold its trusts division to Ganado, who have been involved in [government’s] major transactions – managing my trust would not be the right thing. BOV is reducing its involvement in trusts, and there are a number of private firms which I wouldn’t be very comfortable utilising – I could use Simon Busuttil’s former firm... but I wanted the right professional people to manage it.
You do acknowledge that as a non-NZ resident, you won’t pay tax on assets held in the trust?
But I’ll pay tax in Malta. Everything is going to be declared in Malta.
Let’s say you have €1 million passing through into the trust. You will only pay tax on that portion repatriated not on your full wealth...
The reason that there must be a Panamanian company is that our advisors suggested that the company had to be domiciled elsewhere from New Zealand. There are lots of companies registered in Panama and the cost of registering the company is not significant.
There are also notorious secrecy laws in Panama – it is an offence to breach confidentiality when disclosing sources of income. It has a bad reputation, it has been on European blacklists, and it houses money laundering operations. So this is something that has to do with your reputation as a minister, that you have chosen a jurisdiction that is not reputable.
Let’s be clear. I declared my trust up-front. Had I not declared my assets in the parliamentary declaration your questions would be legitimate. I will be actually monitoring all the activities of the trust, annually updating changes in the activities of the trust, and pay all tax in Malta...
Is there a significant amount of wealth you and your spouse possess that merits the need for this offshore trust?
All my personal wealth is declared in the declaration of assets... [in 2014 Mizzi declared two properties, apart from 4,000 MIA shares, €310,000 in bank deposits, €329,000 in loans, and a €76,000 income].
Are you just using the offshore trust for your London property?
And for the money I have declared in my parliamentary declaration.
And just this merited the need to invest in an offshore trust...
It’s a long-term lifetime setup. It is the right thing to do. I have considerable deposits in the bank in my name which are sitting unutilised – I don’t have time to reap a proper return on them, so I asked professionals to reap those benefits, and use the trust throughout my life. I don’t exclude changing the structure in future, as rules change. In that case I will follow my advisors’ guidance.
What will you be declaring in your parliamentary declarations? Money that flows into your Panama company and onto the NZ trust?
I will be declaring all movements – anything which is deposited in the trust. If there is a return I will be declaring that.
The European Commission is proposing anti tax-avoidance laws, but you – a minister from the EU – are using a set-up that will allow minimal tax exposure. Aren’t you in an awkward position?
I’m not avoiding tax, I’m not breaking any laws. [UK prime minister] David Cameron’s family trust has utilised Panama as well.
It’s quite something for a social democrat minister to use a Conservative prime minister as an example. Don’t you think using offshore companies to minimise tax is not even fitting for a Labour minister?
No, I will pay all due taxes while I am resident here. I do qualify as a social democrat minister – I reduced energy bills, eradicated waiting lists on medicines, I’m cutting down waiting lists, and reducing waiting lists on hip replacements at hospital. I will deliver more, and they will attack me for it – they will attack me by saying I’m not with my wife, and now for having a trust. I’m a progressive who wants wealth to be redistributed but I’m also in favour of aspiration. I work here from Monday to Sunday – I think it is OK for me to think of my family and plan ahead.
As minister you are responsible for some multi-million projects here: Electrogas will build an LNG plant here and it was chosen after an expression of interest soon after Labour’s election, the speed of which led many to believe its choice was a foregone conclusion. Now your financial set-up here, starting form Panama, is a classic set-up used for money laundering, ideal to receive incomes whose source will remain undisclosed. Irrespective of your guarantees, you’ve put yourself in an unenviable position, because you expose yourself to speculation that your Panama company will take kickbacks or bribes from multinationals with an interest in Malta....
There’s speculation and there are facts. I have been transparent in declaring my trust and the arrangement. You have seen the names of the trustees. I will update a statement of facts annually on this. Electrogas was shortlisted and provided a detailed proposal, which was also vetted by the European Commission, which said we followed due process. It is a good deal...
I refute all allegations. Simon Busuttil has alleged that millions are in this bank account. There isn’t one penny...
You will open a bank account for this Panama company...
Of course, if need be. Why not?
And this bank account will receive money from different parts of the world, but it won’t be in Malta, it will be in Panama...
You have a declared structure. Anybody can investigate. In addition to that I am going to be the first MP to submit myself annually to an audit from the Commissioner of Inland Revenue. I am subjecting myself to the highest level of scrutiny. I have no problem with that. I will be asking the CIR to carry out an audit. More transparent than that... because there is nothing to hide. It’s all legitimate.
And will the CIR have access to all documents in Panama as well, which resists signing tax information exchange agreements with the international community...
You know Panama is home to companies accused of money laundering, of bringing in dirty cash and drug money...
FATF’s task force only recently welcomed Panama’s latest progress on money laundering having established a legal framework to meet its commitments...
Panama is resisting any multilateral treaties on tax information exchange. It’s dictating reform at its own pace. It’s still not the clean country you’d want it be.
I have no bank accounts in Panama...
Where will you open your bank account?
My financial advisors will decide that...
They will probably choose somewhere that guarantees full banking secrecy...
Please bear in mind that for me to open a trust meant I had to go through full due diligence.
You are a politically-exposed person – someone who could use his position to abuse of it – who has chosen a financial set-up which people who abuse of their position to receive illicit funds, use. Shouldn’t you be above board and stop this financial set-up?
If I had wrong intentions I would not have declared it. I would not have declared it.
Shouldn’t you use a Maltese trust to be above suspicion?
I’ve explained the reasons... I said the banks are moving out of the trust business, Ganado has worked on government contracts, so I went for a long-term set-up for overseas assets. I don’t know where I will live in the future.
You had instructed Enemalta to hedge for fuel with SOCAR (33% shareholder in Electrogas) which raises suspicions about your intimacy with Azerbaijan, SOCAR – so matched with this financial set-up in Panama, does not paint a positive picture of what you are doing.
Absolutely not. I’ve declared the entire structure of the trust, I will declare all assets and movements, and I will subject myself to a full scrutiny. So no allegations can hold.
Shouldn’t you declare your wife’s assets? You’re a minister of the state and your wife is a consular envoy.
I follow guidance provided by Parliament and the Cabinet office.
So you won’t be declaring her assets...
No I’ve declared everything as requested. She had assets before she got married. I will adhere to all parliamentary rules at all times.
Would it be embarrassing for you to disclose the amount of wealth you and your spouse hold?
No... the money we earn jointly is declared in our joint declarations. Only her assets before marriage are not declared (in the parliamentary register).
And this trust will be used for your spouse’s personal assets from before marriage.
Our intent for the moment is for the family assets.
Would you be ready to disclose the extent of your family wealth?
Everything in joint ownership has been declared.
It seems to me that what you declared in the parliamentary register is too small to justify this financial set-up.
It’s more than that [MaltaToday mentioned his liquid assets] because I have a house in the UK which has not yet been sold; the London apartment I lived in in 2011 was being rented. I have my Sliema apartment and my savings.
Do you accept that your financial set-up is fiscally immoral? You say you believe in the redistribution of income but it is tax havens that allow wealth not to be redistributed in the first place...
I know your views on the matter. Malta reaps significant income from international finance. I will pay taxes on all my earnings in Malta, and please check me out on this on an annual basis.
Can voters trust a minister who uses a foreign financial set-up who takes his assets elsewhere but in Malta, to minimise tax exposure?
I did not set it up to minimise tax exposure. I set it up for family planning...
But again you will only pay tax on earnings brought into Malta...
I will pay full tax on all my earnings.
If all your family wealth was fully repatriated in Malta you would be paying a full rate of tax...
No. I pay tax in the UK on the property rental; I don’t get a tax refund for what I paid in the UK. I will pay tax in Malta on every single transaction carried out. The Maltese should trust me be
cause of my track-record, for reducing energy tariffs, for closing Marsa power station...
Would you advise the Maltese to use this financial set-up?
It’s a free world. Everyone can choose whatever they wish and should seek advice on what is best for them.
Is this the right example to set: using tax havens is a right for people?
My wife lives abroad. We’ve moved around. I might not be in Malta forever. Given what I’ve done, it makes sense.
Minister, there is also speculation on your marital situation: your wife and you live in two continents. Maybe you are unsure about your joint wealth and how it will be managed in future?
It helps given the conditions. We have properties overseas. Hopefully we’ll have investments. I don’t want my money to sit in a bank account earning just 1%. My marriage is as strong as ever. We’re happily married. We have two lovely kids. Maybe it’s not your typical marriage – but it’s always been like that.
When did you inform the Prime Minister of the set-up?
Some three weeks ago...
Was he shocked?
Why would he be? He would be shocked had I not declared it.
Matthew Vella is editor MaltaToday.com.mt and MaltaToday on Sunday.He joined Mediat...
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