Malta creeps up top 20 ranking for most secretive tax regimes

Malta becomes ever slightly more secretive according to Tax Justice Network’s index on world’s most secretive financial jurisdictions

Malta’s score in the Financial Secrecy Index has deteriorated to push the island further up its top-20 ranking for the world’s most secretive financial jurisdictions. 

Malta climbed from 20th in 2018 to 18th in the 2020 index published by the anti-tax avoidance NGO Tax Justice Network – the higher the ranking, the more secretive a country’s tax practices are. 

Although accounting for just 0.66% of the global market for offshore financial services according to TJN, Malta remains a small player compared to other secrecy jurisdictions. 

It scored 62 points, where a 100 is represents full secrecy, which is calculated on 20 indicators. 

But it was the Cayman Islands that leapfrogged to worst offender in 2020, followed by the United States which overtook Switzerland in the global ranking of countries most complicit in helping individuals to hide their finances from the rule of law. 

The top 10 biggest enablers of financial secrecy in the world currently are: 

1.           Cayman Islands
2.           United States
3.           Switzerland
4.           Hong Kong
5.           Singapore
6.           Luxembourg
7.           Japan
8.           Netherlands
9.           British Virgin Islands
10.        United Arab Emirates 

The Financial Secrecy Index ranks each country based on how intensely the country’s legal and financial system allows wealthy individuals and criminals to hide and launder money extracted from around the world. 

The UK increased its secrecy score more than any other country. The UK’s financial secrecy escalation extended to its network of satellite jurisdictions to which the UK outsources some of its financial secrecy activity. Often referred to as the UK spider’s web, the network is made up of Overseas Territories and Crown Dependencies where the UK has full powers to impose or veto lawmaking, and where powers to appoint key government officials rest with the British Crown. At the centre of the network is the City of London, which receives and launders wealth brought in by the satellite jurisdictions. 

The UK’s spider’s web included some of the highest-ranking jurisdictions on the Financial Secrecy index, including Cayman, which ranked first on the Financial Secrecy Index, the British Virgin Islands which ranked 9th and Guernsey which ranked 11th. 

If the UK and its network of Overseas Territories and Crown Dependencies were treated as a single entity, this UK spider’s web would rank first on the index. 

John Christensen, a director and founder of the Tax Justice Network, said: 

“The UK showed the world true leadership in 2016 by being the first country to adopt a public beneficial ownership register – now that progress has been thrown in reverse. The UK’s surge up the Financial Secrecy Index raises serious concerns about the UK’s post-Brexit strategy to turn the City of London into a ‘Singapore-on-Thames’. This should be particularly concerning for EU countries, which collectively reduced their supply of financial secrecy to the world by 8 per cent while the UK escalated its supply by 26 per cent. 

“A more secretive and poorly regulated City of London is bad news for everybody, including people in the UK. Evidence shows that the UK’s oversized financial sector cost the UK economy £4.5 trillion in lost economic output between 1995 and 2015 – equivalent to £67,500 for every person in the UK.9 A post-Brexit ‘Singapore-on-Thames’ strategy would see more money extracted from people in Britain and the rest of world to the pockets of the very wealthiest.” 

Alex Cobham, chief executive at the Tax Justice Network, said: “The world has started to win the fight against financial secrecy, and that’s good news for everybody. Financial secrecy has kept drug cartels bankable, tax abuse feasible and human trafficking profitable - but the majority of countries are now making it clear that this is not the world we want. Creating a fair world that treats all members of society as equals means reprogramming our financial and tax systems to run on transparency, not secrecy, making it impossible for criminals and elites to go uncounted and making sure countries are well-resourced and well-governed to support everyone to lead a meaningful and fulfilling life. We still have a lot of work to do ahead - our governments must keep their foot to the pedal.” 

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