Offshore’s global tax ruse should be illegal

The government has tried to deflect the latest revelations in Panamagate by saying there is no proof of corruption and that the Opposition has been left with just suspicions. It would seem that being above suspicion is now no longer a prerequisite for ministers and top government officials; but beyond justified suspicions of corruption, the real elephant in the room is tax evasion (or avoidance as some others might prefer to call it).

Energy minister Konrad Mizzi and Joseph Muscat’s chief of staff Keith Schembri have set up companies in Panama where they can enjoy the benefits of very low income tax rates, banking secrecy and non-cooperation with foreign countries and institutions. 

This not only shows that the tax audit ordered by the Prime Minister will not get us anywhere, but whatever Mizzi’s and Schembri’s intentions were, they created financial structures which allow them to pay less taxes in Malta. And these are two Labour stalwarts, who have completely done away with what education minister Evarist Bartolo said was one of the party’s founding values, fiscal morality.

Such tax avoidance schemes are alien to many because 99% of the population has never had the need to shift money across the ocean.

In essence, the anger stirred by Panamagate is not derived from the suspicion of corruption alone but the growing sensation that there is one rule for the rich and mighty and another for us mere mortals. The real concern here is that it is perfectly legal for the elite to park their money offshore and avoid paying tax. 

And this is not only immoral, but in my books it should be illegal since it deprives the State of money which could be used to improve our hospitals, schools, roads and welfare system. Simply put, tax avoidance proliferates inequality. 

This week, leaders of the World Bank and the International Monetary Fund (IMF) – who certainly cannot be classified as radical leftists - warned that the industrial scale of international tax avoidance revealed by the Panama Papers represents a “great concern” for the global economy and is having a “tremendously negative effect on our mission to end poverty.”

Instead, we have a Labour government which is increasingly dependent on the privatisation of public services and the commodification of public land and citizenship.  And let’s not kid ourselves: Malta itself is at the very centre of the global tax avoidance industry.

Malta is no Panama. But we must take a good look at ourselves and our place within the world economy. Making one country less attractive to global capital will simply push money to other territories. The problem is international and requires a worldwide solution. We must ask ourselves whether Malta should be an actor in the international orgy of tax evasion, money laundering and kleptocracy, or whether we want an economy that works for all people rather than the few, based on social justice and the highest labour and environmental standards.

Sadly there is broad consensus across the political divide that the financial services industry is indispensable and Malta should maintain its lax tax regime.

Over the years Malta has gained an undesirable reputation as an offshore haven for hot money within Europe. Since joining the single currency eight years ago, successive governments have championed an investor-friendly economy, to the degree that other EU countries, including Germany, France, the UK and Italy, view Malta as a tax haven.

On a global level, this race to the bottom often irks larger economies and the EU’s economic powerhouses are less than pleased with Malta’s lax tax regime.

In order to maintain a competitive edge, Malta offers wealthy individuals and corporations advantageous tax rates, using tax breaks to attract investment or hot money, which could possibly originate from criminal activities as shown by the recent crackdown on online betting companies with links to the Italian mafia.

Malta is under increased pressure as Germany, France and Italy are pressing the EU to tighten restrictions on tax havens, after calling for measures to impede “aggressive tax planning” and “profit shifting.”

Following the Panama Papers leak, Germany’s finance minister is planning a national transparency register that will oblige offshore companies to disclose the identity of their owners and ensure that beneficial owners of offshore companies no longer remain anonymous.

Here, the political class has closed ranks and insists that the trickle down effect of this industry is of great benefit to all. The trickledown effect is possibly one of the greatest hoaxes of the last century. A 2012 study shows that wealth doesn’t trickle down but it just floods offshore, with up to €28 trillion siphoned off to tax havens. 

The political class, in Malta and abroad, seem detached from the real aspirations of people, of the 99% who only want the elite to pay their fair share of taxes as they do.