Panama Papers committee MEP: ‘Konrad Mizzi should consider preparing for invitation’

Panama Papers MEP says committee should only summon minister to testify after sufficient information is gathered on how financial services industry in Malta allows beneficial owners to hide their identities

Minister Konrad Mizzi
Minister Konrad Mizzi

One of the MEPs who will sit on the new Panama Papers committee in the European Parliament said the committee is gearing up for an inquiry into the creation of letterbox companies in Malta and how they are used by European businesses to minimise tax payments back home.

Sven Giegold, a German MEP for the Green Party, is adamant that the 65-member committee carry out a serious inquiry into the way beneficial owners are allowed to hide their identities, before summoning people like minister Konrad Mizzi – the only EU minister to have set up a Panama offshore company through Mossack Fonseca to hide his beneficial ownership while in office – to answer to the inquiry.

“For me the study of documents is important before actually summoning individuals, because I’ve seen a lot of parliamentary hearings that have been toothless,” Giegold told MaltaToday.

“You can only have a tough hearing if you have gathered all the knowledge beforehand. For me a parliamentary inquiry is not a show where you invite the most prominent witness just to get maximum media effect. But to establish the effects of wrongdoing. So this is the second step, but of course, Mizzi should consider preparing for an invitation.”

Giegold says the Panama Papers committee is specifically interested in learning more of the role of letterbox companies, as well as European banks and financial intermediaries and their services in hiding beneficial owners.

“The large number of letterbox companies in Malta is interesting. We want to know why, despite the obligations in the anti-money laundering directive (AMLD) since 2005. The European Commission and member states have remained idle on this matter.”

The MEP said the committee would research this aspect “systematically”, demanding data from the European Commission and member states, because hiding beneficial owners was contrary to the AMLD he insisted.

“I don’t call into question the right of member states to determine their tax rates. But there is widespread use of letterbox companies just to hide their true beneficial owners,” Giegold said, who also insists that German tax authorities are particularly concerned about Malta and Cyprus on this matter alone.

“I know from the German tax authorities that this is a recurrent problem with Cyprus and Malta when it comes to letterbox companies and taxation dues in Germany. I would like to speak to my former colleague, Edward Scicluna to explain to me how a social democrat minister justifies such a system,” he said of the former Labour MEP now turned finance minister.

“The socialist family in Europe is proud to say it wants a common European tax base when in Malta there are special ‘tax offers’ for companies,” Giegold said, referring to Malta’s rebate on tax for foreign shareholders, which can deliver an effective 5% tax rate.

“It does not fit with a socialist finance minister. And we know Malta is part of a group of countries that block regular tax reforms.”

The European Parliament has agreed to set up an inquiry committee into the Panama Papers revelations, of detailed information on offshore companies and their ultimate beneficiaries.

The committee is to investigate alleged contraventions and maladministration in the application by the EU Commission or member states of EU laws on money laundering, tax avoidance and tax evasion. It will have 65 members and 12 months to present its report.

The committee will also investigate a potential breach of the duty of “sincere cooperation”, a principle enshrined in the Treaty of the EU, by any member state that failed to take the appropriate measures to prevent the operation of vehicles that allow to hide their ultimate beneficial owners from financial institutions and other intermediaries, lawyers, trust and company service providers – including looking at the role of trusts, single-member private limited liability companies and virtual currencies.

On 3 April, the International Consortium for Investigative Journalism (ICIJ) uncovered 11.5 million documents from Mossack Fonseca, a global law firm based in Panama.

The documents revealed that Konrad Mizzi and the Prime Minister’s chief of staff, Keith Schembri, opened two offshore companies in Panama through Mossack Fonseca’s agent in Malta, as well as two offshore trusts in New Zealand; as well as having sought to open bank accounts in Panama to deposit some €800,000 annually.

Prime Minister Joseph Muscat has since faced two protests fronted by the Opposition against corruption, three confidence motions in parliament, and only ‘demoted’ Mizzi to a minister without portfolio, under his purview, while retaining Schembri as chief of staff. 

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