Don’t touch our profits: Malta banks come out against windfall tax

Malta’s banking owners have outrightly refuted calls for a tax on super-profits, claiming a windfall tax on their profits would be “short-sighted” and devastating for the economy.

With Bank of Valletta registering close to €90 million in pre-tax profits, and HSBC Malta just over €45 million, the Malta Bankers Association today replied to calls for a windfall tax by declaring that their profits were not excessive.

A MaltaToday editorial on Wednesday argued that banking profits could be used to shore up a government coronavirus stimulus package that will cost close to €70 million each month to subsidise wages for business owners who are unable to trade, but still face the weight of interest rates and rents.

“Banks are amongst the most stringently, multi-regulated and supervised entities at a local, European and international level. Their very existence and continuity to operate depends on their ability to make and retain certain levels of profits,” the MBA said.

“They are evaluated on the profitability of their business model, their level of capital adequacy and the observance of minimum ratios, amongst various other things. Bank profits and their financial strength are what enables them to keep lending and supporting economic activity.”

Malta had already introduced a windfall tax on banking profits in 1998, when Labour minister Leo Brincat levied a one-off 15% on profits. The move replicated a similar windfall tax by UK Labour prime minister Tony Blair in 1997.

But prime minister Robert Abela on Tuesday evening said he would not think of taxing banking profits in the current climate.

But the MBA insisted that its banks had paid “hundreds of millions of euros in direct taxes not to mention many tens of millions more in indirect taxes”, and that its profits benefited thousands of shareholders. “As employers and providers for the livelihood of thousands of bank employees and their families, the banks’ contribution to the country’s social and welfare system is significant.”

The MBA said its banks will continued to provide their essential service with “the necessary lifelines, reliefs and support to their customers in this time of need despite knowing that the banks will also carry their share of the burden for this.”

The MBA said banks will see “a challenging year for bank profitability” with the coronavirus pandemic in 2020. “Talk of imposing special or windfall taxes on the banks as some kind of consequence for their strong past performance would be a dangerous step at a time when the banking system needs all the stability it can have.”

CEOs and senior executives of the core domestic banks have met government officials this week. “Separately the banks have been communicating their own schemes, engaging with and reaching out to their customers in the process. Discussions are also at an advanced stage with the Malta Development Bank with regard to the guarantee schemes announced by Government as part of its economic relief measures,” the MBA said.