What happened yesterday is the game-changer we were hoping would never happen.
Forget the extremely hot election fever, the mammoth mass meetings, the wall-to-wall coverage of the elections on the party stations.
As from yesterday, Malta is under attack – all of Malta, not just one part of it. The allegations contained in the Malta Files, about which readers will no doubt be reading all through today, are a massive attack on Malta’s credibility as a financial services centre.
It is no joke to be attacked as a ‘pirate island’, among other epithets. The Malta Files investigative project was undertaken by the network European Investigative Collaborations (EIC), which has brought together 13 media and 49 journalists in 16 countries and 12 languages.
Tens of stories were published in Belgium, Italy, Portugal, Spain, Germany, France, Serbia, the Netherlands and Croatia, all condemning Malta’s position.
It was claimed that Malta was harbouring firms linked to the Italian mafia, Russian loan sharks and the highest echelons of the Turkish elite.
This is not the first time that Malta has been attacked as an offshore jurisdiction, but never so massively. Over the last three months, the EIC dug into over 150,000 documents that show how international companies take advantage of this system. Malta operates a tax system whereby companies pay the lowest tax on profits in the EU – only five per cent. Although benefiting from the advantages of EU membership, Malta also welcomes large companies and wealthy private clients wanting to dodge taxes in their home countries.
This damages the budgets of other EU-countries and reveals a weakness in the European Union that allows member states sovereign rights over their taxation.
Around half a million names from some 60 countries are cited in the files. L'Espresso said it will be publishing the names, saying politicians and individuals linked to the Mafia were involved.
Among the reports carried overnight, the Malta Files say the son-in-law of Turkish President Recep Tayyip Erdoğan, Berat Albayrak, helped establish an offshore structure in Malta and Sweden to evade millions of dollars in taxes for his company – Turkey’s massive energy, textile and construction group conglomerate Çalık Holding.
Another report explains how Fashion TV investor and Russian billionaire Oleg Boyko and his Latvian partners use Malta as a tax haven for operations in Europe and the US while earning vast profits from emergency loans to Europe’s “poorest and most vulnerable citizens”.
As reported in a leader in The Malta Independent Daily this week, there have been harbingers of this over the past few days. First there was the Finance Minister of the state of the German state of North Rhine Westphalia, Norbert Walter Borjans, who claimed that of some 70,000 offshore companies in Malta, some 2,000 are German companies – an assertion that made the German minister say that Malta was “a sort of Panama in the Mediterranean”.
Then the Italian financial paper Il Sole 24 ore carried a long article by Roberto Gaiullo that highlighted, inter alia, investigations by the Italian Guardia di Finanza into the ‘too easy’ registration of companies, the low Maltese tax regime and how easy it is to transfer one’s company to the Maltese low tax regime (thus removing it from taxation liabilities in Italy).
The report also mentions investigations by the Guardia di Finanza in Gallarate which revealed that a company that repairs smart phones was using spare parts made in China on which no tax had been paid.
It also refers to two other investigations by the GDF in Syracuse and Livorno. People have been arrested and there have been raids on offices.
Then yesterday, a politician of the Cinque Stelle Movement in Italy had to resign after it was revealed he had two secret international companies in Malta.
Enrico Cantone quit after L’Espresso contacted him about his Malta connection.
All this is a tsunami that has Malta as its target.
We still do not know the extent of these revelations or all the Malta connections. Nor is it possible right now to fathom out all the consequences of these leaks. Malta will no doubt repeat, as Finance Minister Edward Scicluna has been doing over and over again, that the Maltese system has been known and approved by the EU ever since Malta’s accession. But will that convince Europe?
The Belgian paper Le Soir yesterday dedicated its entire front page to relate how Malta “deprives the European states of €500 million”.
It looks like a concerted attack, and it probably is. With the EU and the eurozone being only now out of the crisis, with so many millions still unemployed, with entire countries like Italy and now France under President Macron clamouring for reform and with continuing pressure being put to standardise taxation across the eurozone and to combat tax evasion (and Malta is being portrayed as a tax evasion country), Malta will face huge pressure to conform.
If this happens, it will mean our financial services can lose their competitive edge. On Thursday, at FinanceMalta’s 10th conference, the speakers were still exuding optimism on a bright future for financial services, even though there were some oblique references to what a participant called ‘the elephant in the room’. But this person was referring to PanamaGate and its local reverberations, little knowing what was going to be revealed yesterday.
This attack is bigger than the election, even bigger than PanamaGate, Egrant and all that. It is an attack on the whole financial services sector, making all employees in the sector tainted by association.
We do not know so far the motivation behind this attack. Certainly, the timing – on the eve of the election – is suspicious. Throughout the whole of yesterday we could see the parties struggling to harness this new development to their electoral strategies. The PN claimed that there is a link between the Malta Files and PanamaGate. The PL blamed the PN MEPs who attacked Malta’s financial services sector in speeches in the European Parliament. The Prime Minister yesterday afternoon called for a joint action but at no point did I hear an invitation to his counterpart either for a suspension of the electioneering or at least for an early meeting.
What is certain is that this attack is on the financial services sector as a whole, and not on just Konrad Mizzi or Keith Schembri. I believe Joseph Muscat was incredibly lax in not taking any steps with regard to the Panama two and this and its repercussions might have impacted on the Malta Files, but equally – as already happened in the passports for sale issue – I would not put it past many practitioners in financial services, (many with PN affiliations) to be at the forefront of what is now being attacked.
Let us see the details coming out and speak afterwards. Maybe everything that was being done was in accordance with the laws and regulations that Malta has had over the past years in agreement with the IMF and the European Commission. In which case, Malta must continue to argue that it is no tax evasion haven and what was done is legitimate has been done has been legitimate.
Even so, however, I fear the cumulative impact will make us roll back our precious competitive edge.
[email protected]