The Malta Independent 17 November 2017, Friday

Muscat in Strasbourg rails against Egrant 'lie' and Malta Files tax haven label

Kevin Schembri Orland in Strasbourg Wednesday, 14 June 2017, 14:05 Last update: about 5 months ago

Prime Minister Joseph Muscat was not given the friendliest of welcomes in the European Parliament today, as MEPs representing many EU parties slammed Malta for the way the country has handled the Panama Papers, and also brought Malta's tax structures into question.

A few MEPs made clear that re-election does not remove the suspicion that has been created.

Muscat went to the European Parliament, who were discussing a topic titled: "Council and Commission statements - Panama Papers follow-up and the rule of law in Malta." Following statements by the Council and the Commission, MEPs also had their turn to have their say.

The lack of action by the authorities on FIAU reports was brought up during the debate, as highlighted by Greens MEP Sven Giegold, but so was the re-appointment of Konrad Mizzi to the post of Minister and Keith Schembri being kept on as Chief of Staff.

In addition, a few MEPs also did not hold back from saying that Malta is a tax haven and should itself be on the blacklist.

The Prime Minister was caught laughing when PANA Committee Chair Werner Langen, who forms part of the EPP, was delivering his speech. "You can laugh if you like, but we will insist that you do not get off scot-free. If you do nothing we will continue asking questions."

Muscat, after hearing many MEPs from the EPP, Greens, ALDE, GUE and others on the aforementioned topics, answered by defending Malta's tax system and the islands authorities. He also said, however, "I expect a more informed debate in such a House" and then stated that some MEPs quoted the lies regarding Egrant and his wife Michelle.

Opening the debate, European Affairs and Equality Minister Helena Dalli said that agreement was reached on double taxation dispute mechanisms which will enhance tax certainty, making such mechanisms binding, faster and more efficient.

Prime Minister Muscat, after expressing solidarity with Britain in the wake of the high-rise building fire in London, made some points on the progress of the rule of law in Malta. "One of the first bills we presented as a government removed time barring on acts of corruption by politicians and those holding public office, he said.

It will hold all politicians and public officers to account for their lifetime should any evidence crop up linking such persons to corruption. It is a unique piece of legislation at EU level.

He spoke of the Whistle-blowers protection act, mentioning that some MEPs have called it a benchmark. We have had 29 reports lodged under this act, he said.

He mentioned party financing legislation, saying it was necessary and in the national interest. This, he said, led to Greco saying Malta was in line with its main recommendations. We also change the way members of the judiciary are appointed.

We did all this in just four years and we intend to do more. One of our pledges is that of removing any Parliamentary immunity, introducing a transparency register, introducing a new code of conduct for all those holding public office, the Prime Minister said.

EU Commissioner Economic and Financial Affairs, Taxation and Customs Pierre Moscovici then spoke, and said that the Panama Papers came after another similar scandal.

He said that President Juncker had spoke about this and a lot has been achieved. He said that action taken and that is continuing to be taken is important.

We changed the way in which we have cooperation between member states. The norm is to share information between states. We combat tax evasion with two directives which led to binding measures being introduced.

We took external action to ensure we have good tax practice beyond our own single market, he said, adding that proposals have been made to strengthen anti-money laundering directives. We were also able to create a list of tax havens that was thanks to the help of a Maltese minister, he said.

He said the Commission wanting to tackle VAT fraud across the EU. "This is happening on a huge scale. There are criminal gangs and networks doing this. VAT fraud takes advantage of certain loopholes and there are bank accounts outside the EU where we know there is a vulnerability to such fraud. We propose having a definitive VAT regime."

He said he wants the EU and member states to be at the forefront of the battle against tax evasion.

EPP President Manfred Weber congratulated Muscat on his electoral victory. "In the interest of the EU you showed that you are ready for change from time to time, and re-thinking your own position. You were previously against joining the EU and today you know Malta benefits from this and it is a success story. It shows you are ready to rething your position. When we are discussing this question, the Panama Ppers linked to Malta, the most important question is why is there still a minister in your cabinet wwho is the only minister in Europe on the Panama list.

"You won the election but the questions are still on the table. As the Presidency of the EU Council we want clarification of this.  You spoke on paper about rule of law in Malta, and I was hoping you could show us results of this legislation. One thing is paper, but what is its outcome, the reality of this?"

S&D MEP Jeppe Kofod said that where there are allegations there must be an investigation, a ruling. So far, only 2 of these have taken place: the allegations and the investigations. The plenary is not the proper forum to deal with these allegations. "Do you, colleagues, question the democracy of a country with a 92% turnout," he asked. "I will insist on having fact not just accusation. I seriously question if the EU as a whole is capable to responding effectively to the Panama Papers. Vital EU tax measures keep getting held up in the council. We must channel all our efforts to making EU solutions."

Bernd Lucke from the European Conservatives and Reformists group questioned why this debate is occurring now. What could be more democratic than having the people find out the facts before people go to the polls? Why weren't the PANA Committee proposals not followed. This is not a good example of democracy far from it. Criticism has to start at home."

Alliance of Liberals and Democrats for Europe member Petr Jeze mentioned the PANA meeting in Malta, and said that in the face of it EU law was implemented, but there are questions on the enforcement and on whether strong and independent institutions and the rule of law exist.

Fabio de Masi from  European United Left - Nordic Green Left slammed Malta, and said it is a haven for mafia money laundering. the money Malta protects is stained with blood. The Maltese reelected their government, but it was no surprise as there was no realistic alternative. The council and commission must close loopholes in its anti-money laundering directive. The blacklist of tax havens has to include EU countries like Malta. Will you appear before the PANA committee of which I am a member, de Masi asked Muscat.

Sven Giegold from the Greens then spoke, saying that the Greens are seriously concerned about the state of the rule of law in Malta. The FIAU has investigated several cases of serious wrongdoing in the field of money laundering and bank licensing.

These have, unfortunately, not led to prosecution procedures. The three known reports of the FIAU were leaked to the media, but prosecutions have not taken place. We call on the Police Commissioner to open prosecution priocedures. There should be consequences for financial institutions involved. The head of the MFSA, Bannister, is the same time head of Malta Finance, which is a conflict of interest, Giegold said.

We think the supervisor should take action against Nexia BT and Pilatus Bank, to look at their licences following the Panama Papers and the FIAU reports. The key persons involved in the Panama Papers, including Schembri, Cini, Tonna should appear before the Panama Papers Committee as they have failed to do so, so far.

It is time for a thorough investigation to start. We wrote to the Commission to start investigation regarding law violations. It is time for Malta to earn back its reputation. You have it in your hands to reveal the truth of everything and have fair and tough investigations. These are not replaced by elections, he said.

Coburn from the Europe of Freedom and Direct Democracy mentioned Konrad Mizzi and Keith Schembri, but said that it is not the EU Parliament who should interfere in an investigation of a sovereign state. He said that some MEPs are using this debate as an excuse, and want a taxation union. He said that this debate shows why it is so important for a hard Brexit.

Barbara Kappel from the Europe of Nations and Freedom said that Malta is number one in economic terms in the EU, and that is probably why Muscat was reelected, but the Panama Papers showed there are issues.

Lampros Fountoulis from the Non-Inscrits said corruption is a scourge in the EU. We need an investigation in Malta, but it is not up to this Parliament to do that. There are all sorts of suspects lurking around in the way finances of the EP are managed. We should respect what the people did which was elect a new government. What we can't do is let only a few set themselves up as the voices of justice.

PN MEP David Casa said that over a year ago “plans for large scale corruption and money laundering by people at the highest levels of Malta’s government were exposed by the Panama Papers.”

He said that the Maltese Prime Minister has been given a second chance by the electorate, “a decision we respect. But the vote last week does not absolve the sins of corrupt politicians. The Prime Minister’s second chance has not started well. He has re-appointed corrupt money launderers to his cabinet. The Prime Minister now has a choice. He can go down in history as Malta’s most corrupt prime minister, or he can choose to fix this mess. He can choose to restore the institutions. He can choose to draw a line and stop the kickbacks, the trading in influence, the theft from the Maltese people.”

“If he chooses this I will be there to help him. We will be there to help him restore Malta’s reputation, to help him defend our financial services sector. We are here to today to ask that he not continue to squander this second chance. I love my country and I know that this behaviour is not reflection of the Maltese people. It is not a reflection on Malta.  It is because I love Malta that I will continue to speak out against corruption. It is because I love Malta that I will speak out when our institutions are weakened.”

“Prime Minister, you have a very small window of opportunity to limit the damage you have caused. Use it. Do not keep approving corruption, I ask you to join us in the fight against crruption and criminals in our country," Casa said.

PL MEP Alfred Sant said under Muscat, the economy reached unprecedented growth rates, delivering prosperity to all segments of the populations. He said critics have no basis to claim rule of law has been undermined. He mentioned the magisterial inquiries, going on in total independence, and said the PM will respect their conclusion.

He said the financial services operates in conformity with EU and OECD rules. The grounds for this debate are non-existant.

Another MEP said that a year ago Sant said Mizzi should resign, and asked the former Prime Minister how he feels about his reinstatement. Sant responded: "The PM must respect the verdict of the people. I note this has been done in this case as well."

Michael Theurer from Alliance of Liberals and Democrats for Europe said that the tax committee reports revealed how over-complex tax systems have loopholes which are exploited. With the Panama Papers we now have an idea why there has been no progress. Some politicians, showbiz persons etc are involved in some deals. As Parliament we are passing laws against tax evasion, he said, but we get the impression that such law is not implemented. If ministers' names appear in the papers then of course there is suspicion that little progress is being made.

It is a terrible situation that needs to be cleared up. It's basically like giving criminals the keys to the house. What about a Maltese independent inquiry in Malta? Even the PM's wife is being named as the beneficial owner as one of these companies. Under such circumstances it needs to be proven that such accusations are false or the rule of law needs to be enforced.

Eva Joly from European Free Alliance said re-election thus not remove suspicion, and mentioned the need for a full independent investigation. She said that Malta cannot be seen as a tax haven in the EU. She said that it is high time governments take acocunt of the harm caused with such practices.

Werner Langen from the EPP said that the PM mentioned progress on the rule of law. "What good is that on paper when you have not carried out a proper investigation? You have a responsibility to do this. We have not received responses to questions we have asked, or to invitations we have sent (as the Chair of the PANA Committee) This is total disdain toward the EP I have never seen anything like it.”

Addressing Muscat directly, he said, “You can laugh if you like, but we will insist that you do not get off scot-free. If you do nothing we will continue asking questions.”

Labour Party MEP Miriam Dalli said, "It is interesting that the EPP raised this debate to give impression that rule of law is absent, trying to compare Malta to Hungary led by one of their political family. What they have not said is the PN played judge jury and executioner for weeks saying who they would put behind bars, putting pressure on institutions and continuing with baseless allegations in this chamber. This is the real threat to democracy.”

She noted how this government introduced the whistleblowers act and party financing.

Monica Macovei from the ECR called for a full investigation of the scandals in Malta as there are with any other case revealed by the Panama Papers. "If we want to combat money laundering and tax evasion we look into the corners of every member state."

⁠⁠⁠Nils Torvalds from the ALDE noted how debates have already been held on Malta. "We understand getting a functioning economy as a small country is hard, but we are concerned about the progress of the money laundering directive. The Maltese Presidency does not manage to take this to a full conclusion. The key point in our effort is to try and close the loopholes in taxation and we need to find UBOs of such companies. the Maltese Presidency does not seem willing to bring this to a conclusion.”

Dariusz Rosati from the EPP spoke of the PANA fact finding mission to Malta. He said that Keith Schembri, who appeared in the Panama Papers, refused to meet with the committee, "while Konrad Mizzi failed to convince us of his innocence. It is unacceptable that a high official refuses to appear before the PANA Committee. It is also worrying that you have not suspended Schembri and Mizzi until legal investigations conclude. This has undermined the credibility of your country and you personally and sent a bad opinion to the people.                       

Ramón Jauregui Atondo from the S&D said that Malta has shown the will to strive for transparency and fair competition in the tax field.  “We hope that Malta will be at the forefront of combating tax havens. It’s not only about Malta. 40,000 individuals linked to the EU are mentioned in the Panama Papers and OLAF has decided to investigate people. It is not about pointing the finger only at Malta. W need a full investigation of anyone involved in these activities.”

Nationalist Party PN MEP Roberta Metsola noted that there are a number of magisterial inquiries in Malta.  She said, “We would betray our country if we defend those being investigated. I am proud to be Maltese and defend my country.

She said that “what defines us as Maltese and EU citizens are our values, to work in the interest of our country is our duty. I promise that we will continue defending our country and what we believe in.”

PL MEP Marlene Mizzi said this debate "should not have taken place and is motivated purely out of partisan reasons".

She said this debate is not about the rule of law, those who wanted this debate tried to get it done before the election. “These are shameful bullying tactics,” she said.

Markus Ferber from the EPP said it is hard to break through the cocktail of silence the council built with the commission. The Commission said there are no tax havens in the EU. “The work of the PANA inquiry shows otherwise. When we look at PANA, we look at how individual taxpayers hide their wealth from authorities. Maltese citizens in high responsibility positions are involved in tax evasion and that is a terrible example. If you just base economic growth of exploiting tax systems of other countries, it does not really hold water.”

Paul Tang from the S&D said that there is a lack of facts in this debate. He went to Malta with the PANA Committee delegation, and said that he believes the EP, before debating this, should gather facts and not just have opinions and accusations. "Let me talk about one topic where we have evidence of tax competition, where small firms pay more tax then big competitions. Malta has a very different system and there is nothing wrong with that. I would ask the PM to join the investigations to close loopholes, and I expect that from Malta. I also ask that he join efforts to introduce the common consolidated corporate tax base, which is an EU response to make the tax system fair."

Paolo Rangel from the EPP said that what has been going on in Malta is shameful, “Thanks to the Panama Papers this came to everyone’s attention. We cannot go on in the EU with these non-transparent activities being permitted under our legislation. It’s not only about Malta.”

S&D MEP Ana Gomes spoke, and said that this behaviour endangers the reputation of the countries authorities. She said that l'Espresso has said how Malta is used by businessmen and politicians to create front companies which are used to hide where funds come from and send it round back into the financial system. You sell citizenships, and this is in the Air Malta magazine. Malta is not the only one in the EU to do this. Malta doesn’t seem to be working for EU or socialist values, but it is a tax haven, one of many, and we need to put an end to this."

Doru-Claudian Frunzulica from the S&D said that the Maltese tax system is in line with international systems, but it gives advantages. He noted how Schembri refused to appear before the committee.

European Commissioner Moscovici said that he is aware of the magisterial inquiries in Malta, but said the Commission can’t comment on sub judice investigations, and this is why he will not comment on these matters. Turing to the letter sent by Gieglold, "we will note the letter and respond to it".

He said that several MEPs today said that the Commission should not say there are no tax havens in the EU. A tax haven does not respect international standards. Going beyond that there are rules for transparency and combating tax avoidance which are included in EU legislation. We can now say we go well beyond international standards in the EU. All member states adopted and apply these rules, and have all declared the will to respect those commitments.

“There are also soft law mechanisms, a code of conduct for harmful tax practices. it is indeed necessary to adopt stringent measures to combat unfair tax practices in the EU, that does not mean one can call an EU member state a tax haven.

“I don’t think that would be intellectually rigorous and the Commission is not going to do it.”

Prime Minister Joseph Muscat said that he is happy to be here. “I consider this a natural second home to me.  I understand the spirit of the debate and the political narrative of it all.

“Allow me to reply in kind and be tongue in cheek in my replies, candid and open in the way I answer your concerns

“I understand the majority in this house did not agree to this debate to occur in the campaign. I thank Weber to the contribution to our campaign back in Malta.”

He said the only politicians mentioned in the Panama Papers is Maltese, this is not true, there is a Commissioner from the EPP family.  “Nobody said anything about that.”

“I do believe that this was the first incorrect fact. There are three ways in which this debate has gone

“There is the debate on the Panama Papers, a debate on taxation, and an outright lie.

“MEP Metsola said there are investigations in court and they will decide if there will be a prosecution. There has already been a commitment that if there is prosecution, resignations will be in order.

“This is the most basic fact that a number of members got wrong, the problem is members source their facts simply from social media, and not digging deeper to try and assert the facts

“I do believe that some of the conclusions you referred to were truly denied by the same independent institutions that are being quoted, included the FIAU.

“I will mention some fact which that need to be asserted.  Let’s start with our tax system. It is unique in Europe, but has been there since WW2. It was scrutinised by the Commission before we joined the EU.  It is OECD compliant.

“Some might not like it.  Some might say it is competitive.  The fact is It has undergone all levels of scrutiny by organisations.

“There are two ways we can go on the taxation element. I agree with this house that we as the presidency and as a government have gone to length, not only not to obstruct dossiers in this area, but to conclude some, such as the 2nd recast of the anti-tax avoidance directive, and profit shifting.

“These are issues where progress was achieved under our Presidency. This fact must be taken into consideration. I must stress that our government are part of the OECD exchange of information. Some mentioned the Malta Files, there is nothing secret. The people with companies back home are publicly available.

“I invite you to look at the tax justice networks financial secrecy index, and you will find at least 5 member states ranked lower than Malta in this regard.

“We have done away with banking secrecy more than a decade and a half ago.

“We are not the last people to join the fight against tax avoidance and evasion. We disagree where member states should not be left to decide their own tax levels. I believe that is fundamental irrespective of the composition of the economy. Our economy is not dependent on the financial services.

“If you look at basic numbers, our main exports are microchips. In almost all your phones you will find a microchip made in Malta.

“We are not a ‘mailbox’ economy.   If you look at basic numbers, our main exports are microchips. In almost all your phones you will find a microchip made in Malta. 

“I expect a more informed debate in such a House. Let me move on to some other issues. I spoke about the way we source our information and direct debates. Yes a number of you relied on reports on the media, but none of you referred to Moneyval reports. Let’s refer to the facts.

“It’s not about who tweets and posts on the internet.  Greco spoke to us about Party Financing and we implemented it.”

He referred to his third point, regarding lies, and said that “some people in this House referred to a story, a lie, directed against me and my family, that I have some form of structure, accounts or funds that I took from some contract. This is an outright lie.

“We respect the rule of law so much that I went to the courts, an independent institution.  I asked the courts to appoint a magistrate to investigate these allegations.  I went further, and said that if there is a shred of truth I will resign.  I put myself on the line as I know it’s untrue.

“I asked those who made the allegations to put their career on the line if what they said is false and they did not take up the challenge.

“I know I am saying the truth and I am marvelled that some knowledgeable members of this house took this fake news and repeated it here.

“Regarding the PANA committee, I said I will come to the committee. If you don’t get this simple fact right, check your press reviews or fire your people. I said I will come once the inquiry concludes to present facts ascertained by the Judiciary. I am amazed this basic fact was overlooked when there is what should have been a serious debate.

“The second part of the topic for discussion is the rule of law.

The Economist classifies Malta as one of the few full democracies, while some other member states are not full democracies

“We have an independent National Audit Office that criticises government when it deems it fit to do so.  We have an Ombudsman who is critical of all institutions. A Public Service Commission made up from both sides of the house. An independent judiciary, which gave the opposition two seats last election. We have the Chair of our Financial Regulatory Authority who was appointed by the previous government, as was the Attorney General.

“We will soon have a Commissioner for Public Standards. We enacted a Freedom of Information Act, We relaxed media laws, we removed criminal libel.

“We not only have the best performing economy in the Eurozone. It’s about tourism manufacturing the services industry, it’s about the honest people who work each and every day. We introduced universal free childcare, etc. this is prosperity with a purpose and the sort of debate I would love to have in this House. I hope that when I appear before the PANA committee I will be here to present facts and they will hopefully show how misguided some colleagues have been.”

 

 


 

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