The sun starts setting on our financial industry

It seems that some big shots in the financial services sector were fast asleep and together with Simon Busuttil and Joseph Muscat have failed to smell the coffee. Coffee which has been brewing for ages now.

This newspaper reported a KPMG conference during which it seems that it has dawned on them that some EU countries will be turning up the heat on companies which register in tax havens such as Malta to pay no tax at all or ridiculous amounts of tax on their profits and that ‘something needs to be done’ to counteract this ‘threat’.

A KPMG spokesperson spoke of a threat to ‘Malta’s sovereignty over its own fiscal affairs’ – the truth is that in or out of the EU, it was patently obvious that one day or another other countries will take steps to ensure that companies operating within their territory contribute their fair share to support public services.

Simon Busuttil brags about Nationalist governments’ initiatives to build the financial services industry and Malta’s ‘favourable tax regime’. Favourable to tax avoiding multinationals of course – which avoid an incredible €1.1 trillion in tax. Joseph Muscat can go on and on about Malta as a centre of excellence in the financial services sector. All well and good. The taxation model on which the industry is based was a pragmatic decision which undoubtedly created jobs. What is worrying is the usual lack of planning. A ‘make hay while the sun shines’ business model necessitated a Plan B, in preparation for when the sun stops shining.

The arguments about Malta being a small country which needs to compete with giants is true. It is also true that a race to the bottom on tax rates can work against us in the long term. It is also patently obvious that common citizens who pay tax rates, national insurance contributions and VAT much more than a measly 5%, expect megacompanies to pay their fair share and support the provision of public services.

We were told over and over again that Malta is a ‘centre of excellence’ in financial services, so are they now suggesting that the whole industry depended solely and uniquely on extremely low taxes? Will an EU minimum common tax rate wreck the industry? Are the industries' foundations that flimsy? Was this the ‘excellence’ successive PN and PL governments' boasted about?

I sincerely hope not. I am sure that the industry can come up with creative solutions and adapt its business model to the unavoidable scenario in which multinational companies contribute a fair share to society – like workers and SMEs have been doing all along.