‘Nothing offshore about Malta’: Muscat vows solid defence over Malta Files

News of the Malta Files took their predictable course: instead of a debate on tax justice in Malta, political pundits sought to throw around blame for the way the international press was portraying the island.

Every year, Malta receives over €240 million in international tax receipts thanks to its unique tax system, which gives foreign shareholders up to six-sevenths of the 35% tax they pay on profits generated overseas and booked in their Malta holding companies.

But finance minister Edward Scicluna said Malta was being bullied by other European entities, saying the island’s taxation and remote gaming framework was the envy of other nations.

“If we don’t present a common front, irrespective of our political colour, it would endanger investment and jobs in Malta.”

Prime Minister Joseph Muscat dubbed the Malta Files “an unprecedented attack” on the island’s financial services. “One should not be happy at these accusations. Nothing in the Malta Files is actually secret. Indeed, I will present a solid defence of our system. I appeal for a national front.”

Muscat insisted this was a time for the country to come together to present a united front and safeguard Malta’s fiscal system. “I am prepared to work with the opposition towards rebuilding a consensus on this issue,” he said. “It is our duty to defend our country and I – for one – will be defending our country.”

Muscat also said claims of “offshore” companies in Malta were factually incorrect.

“If we want to moralise about our system hosting pay-day loan companies or gaming companies, we can have that debate. But I say we have a competitive system, and the complaint of other countries is not that these companies must not exist, but that they want the tax these companies pay.

“But Malta is a full-time member of the EU, not part-time. And a basic point of the single market is freedom of establishment. So I have no difficulty to defend the system. We’re not alone in the European Council – a prime minister I speak to told me ‘the day they touch our taxation is the day we’ll say no to everything [in the EU].”

Muscat dismissed claims by PN leader Simon Busuttil that the Malta Files were the consequence of inaction on his part when the Panama Papers scandal broke last year.

“It has absolutely nothing to do with it at all,” he said. “If anything, it works the other way round. If Malta’s tax regime was so secretive, then [Konrad Mizzi and Keith Schembri] wouldn’t have needed to search for another country if they wanted to hide money.”

He urged the Nationalist Party not to try and score political points from the Malta Files, but rather present a united front along with the government.

“I am ready to pay the political price for Panama, but there shouldn’t be any political tit for tats on this issue. This is the first time that the government and Opposition haven’t presented a united front when our tax regime was under attack, and I hope that we can find that front again, at least after the election.”

Scicluna: No secret set-ups

Despite the massive interest of the European press in Malta’s tax regime, the island has never been chastised by the European Commission or the Organisation for Economic Co-operation and Development (OECD) over the system or any possible lack of access to information. A recent report on aggressive tax avoidance systems in the EU, did not even mention Malta.

“Whenever a country, for example Germany, asked about a particular company, the Maltese authorities immediately provide all the information in their possession,” Scicluna said, who this week was in Berlin speaking to the press about the imputation system.

He also said that he had never received any complaints from German finance minister Wolfgang Schauble. “Our tax regime and remote gaming framework is the envy of other countries, and we do not have any offshore companies in Malta.”

“There is no banking secrecy in Europe and we have tax exchange information accounts; we haven’t had bearer bank accounts since before 2004, while other EU countries still have them. Under the Tax Justice Network’s transparency criteria, Switzerland and Panama are at the bottom of the list. Malta is ranked 50th, while Luxembourg is 54th and Germany is ranked 55th.”

Scicluna called on political parties and operators in the financial sector to strongly confirm their support of Malta’s fiscal regime. “From the little I have seen thus far, this is obvious spin and has nothing to do with local governance. This time, they are going for the country’s jugular, hitting us where they know it will hurt us: the fiscal regime and the regulatory regime. I urge operators in the financial sector to stand up to this attack that is threatening their livelihood and to defend their country, away from politics.”