After Panama leaks ‘PM must take hard decisions’ – Scicluna

Finance minister Edward Scicluna took some time of his speech in parliament discussing a financial services bill yesterday, to remind MPs that the effects of the Panama Papers leaks could be felt on Malta’s financial services as the country fights back an attempt by the European Commission to come down hard on low-tax jurisdictions.

“We must consider the political consequences of what is being reported,” Scicluna said. “The prime minister must take the necessary and hard decisions in the country’s interest.”

Moving the second reading of a bill to amend the Financial Services Act, Scicluna called for a unified political front to defend Malta from any attempts by the European Commission to harmonise tax structures across the bloc.

“I will meet the OECD to explain that Malta is no tax haven, that it is a legitimate tax centre that has also already been evaluated by the European Commission,” Scicluna said of Malta’s financial services industry, which in 1994 started phasing out its offshore regime.

Now Malta faces an onslaught from the European Commission’s attempts to introduce stricter rules on ‘BEPS’ – base erosion, profit shifting – that allows companies to minimise their tax exposure by moving their holding companies to low-tax jurisdictions.

Opposition leader Simon Busuttil has claimed energy minister Konrad Mizzi’s offshore company in Panama will weaken Malta’s hand in any EU negotiations. But if anything Mizzi steered clear of Malta’s onshore regime, and it will be the international ire on Panana Papers that will strengthen European Commissioner Pierre Moscovici’s will to enforce his BEPS rules.

And the same House that on Monday took umbrage at the revelations of Panama Papers and the use of offshore companies by Mizzi and the Prime Minister’s chief of staff, was on Tuesday rallying to stand up to Brussels and its BEPS rules.

“We won’t accept tax harmonisation that removes our competiveness or damages Malta,” Scicluna said in parliament, conscious of the effect that Panama Papers would have in strengthening the hand of critics seeking to level out the European playing field. “Protecting our financial services industry in our country, from competitors in other countries who will use this campaign to undermine our competitive stand.”

As expected, Opposition MPs pledged their own support for the financial services industry, while criticising the government over the revelations from Panama Papers and the fall-out it would have on Malta’s reputation: Energy minister Konrad Mizzi was the only EU minister to have been found to own an offshore company in Panama set up by Mossack Fonseca.

At stake is Malta’s system of offering up to 85% rebate on tax paid by non-resident shareholders – a refund paid out by the Inland Revenue Department within two weeks of payment of the corporate tax.

MaltaToday has filed a Freedom of Information request demanding the full extent of corporate tax refunds, but since then it has been approached by members of the financial services industry cautioning it from arming the island’s critics with data that could compromise its negotiating position.

On his part yesterday in parliament, the shadow economic minister, Claudio Grech, described the financial services sector as the source of a high degree of tax revenue by virtue of the high salaries it paid out to employees.

“We cannot deny this sector the importance it merits… We must control the fallout from what certain member states want to achieve. We must be proactive. The risk is big to our country’s economic make-up.”

Even Grech called for a sense of unity to safeguard the financial services industry. “This is not an issue pertaining to Labour or Nationalists, this is a national issue pertaining to our economy and I am concerned about. The finance minister has to make his best effort to ensure our country is not exposed to any risk and to repel any threat to our fiscal system, to what makes us competitive.”

Other speakers included shadow finance minister Mario de Marco, who set much store by Scicluna's reference to the need for Joseph Muscat to take "hard decisions", and Nationalist MP Kirsty Debono.