A crisis of morality

The Opposition was quick to dub the event as ‘surreal’, given that a member of Muscat’s own Cabinet was the only European minister named and shamed in the Panama Papers (and, unaccountably, the same minister still occupies a Cabinet post today).

To be fair, however, the forum was also characterised by government representatives (including heads of state) from various countries worldwide who candidly admitted corruption is a major problem afflicting their own governments. The purpose of the forum was in fact to come up with initiatives to tackle the problem of corruption, based on the individual experience of each nation. From this perspective, Muscat’s participation was no more or less ‘surreal’ that that of the President of Nigeria, Afghanistan or other countries known to be rife with corruption.

Muscat’s actual input to the debate, however, is another question. His declaration that he was “there to face the music”, or that he took “tough decisions” back home, will surely ring hollow. Indeed, not even Konrad Mizzi (still less his Prime Minister) has ‘faced the music’ over the Panama Papers revelations. Losing the energy portfolio, on its own, is meaningless when one considers that Mizzi is to this day still issuing public statements on Malta’s energy policy… making him the de facto energy minister, even when that portfolio has passed on to Joseph Muscat.

If Muscat were sincere about ‘facing the music’, he would have removed Mizzi from the Cabinet altogether. And if he were seriously intent on taking ‘tough decisions’, he would have responded with more than just a half-hearted demotion that, as seen this week, proved to be nothing more than a cosmetic measure.

As things stand, Muscat’s decisions in the face of the Panama scandal were cold, political calculations, aimed only at limiting the damage already done. And even as he addressed the forum in London, Labour exponents in Malta were busy muddying the waters on the entire issue in a bid to lessen the impact on Mizzi.

Indeed, it seems as if Muscat has taken none of the lessons of the Panama Papers on board. Even now he seems intent on making maximum political capital out of the fact that Nationalist-associated lawyers and auditors, who form part of a satellite of intermediaries in the offshore game, should also be made to pay the political price.

This reaction is at best hypocritical: lawyers and accountants are not bound by the same standards of ethics and transparency as MPs, still less serving Cabinet ministers. Nor are they saddled with the same political responsibility. It would have made more sense for Muscat to visit that opprobrium on Nexia BT, the audit firm that assisted his own PEPs in creating their offshore set-ups, rather than limiting his criticism only to firms associated with the PN.

Having said that, it is hard to agree with Francis Zammit Dimech, who compared financial intermediaries to criminal defence lawyers – they are not the ones being charged with a crime, he argued.

Zammit Dimech’s analogy is very clearly flawed. Criminal defence lawyers guarantee a fair trial for people accused of falling foul of the justice system… but they certainly play no part in committing the crime. Financial intermediaries, on the other hand, assist people to make use of an unfair, possibly illegal, system of avoiding tax. The ethical juxtaposition is a fallacy.

However, the truly ‘surreal’ aspect of Muscat’s London performance is also a reflection of the double game Malta seems to be playing on an international level vis-à-vis its contentious national fiscal policies, which – however one tries to disguise them – are plugged into the same machinery that allows companies and entities to shop around for the most favourable tax conditions (often, a euphemism for tax evasion or money-laundering).

The moral question which has so far been avoided is what to do about Malta’s financial services sector being in thrall to the offshore game. If it’s immoral, then rules should be forthcoming to regulate the sector: rules preventing Maltese citizens from making use of offshore, if this can allow them to avoid paying tax at home.

The same question must be asked of the Opposition, which likewise venerates financial services as an untouchable pillar of the Maltese economy. The Nationalist Party has so far defended the industry tooth and nail, as long as anything it does falls within the confines of legality. But this is clearly not good enough, when the entire industry is geared towards finding loopholes within the system.

Ultimately, there is a political lesson here for Muscat. When Lawrence Gonzi ignored public sentiment on the secret pay rise he unilaterally ordered in 2008, the air of suspicion that hung over his administration was unrelenting. Muscat will be haunted right up until the elections, and perhaps beyond, by a crisis of morality caused by his own unwillingness to do the right thing, and send the message that offshore is wrong, and that PEPs who make use of tax secrecy cannot remain in office.