The Malta Independent 21 October 2019, Monday

TMIS Editorial: Not just the best in Europe, the best in the world

Sunday, 28 October 2018, 12:00 Last update: about 13 months ago

It was a rather dubious accolade earlier this week when the concessionaires of the country's passport-selling programme labelled the Maltese programme as the top citizenship-by-investment programme in the world, somewhat akin to Pepsi issuing a report that it is the world's best cola.

This newspaper has made no bones on its reservations about the country's Individual Investor Programme, and it is still our belief that Maltese citizenship should absolutely not be put up for sale as a commodity, which is clearly the case.

That is because, for all of the government's fine words about attracting "talent" and "investment" to the country's shores, we have seen very little, if any, of such more meaningful attributes coming our way.

We speak of the "donations" from passport buyers that have gone to orphanages and playgrounds, but these have been far from alms from generous foreign benefactors. What those donations have earned the ultra-rich buying Maltese passports are credits that let them off the hook from actually needing to reside in this country for any meaningful period of time. That period was meant to have been a minimum of one full tax year residing in the country, but with these donations, they have been able to tick weeks and/or months off their penance - the time they supposedly need to spend in the country in order to qualify for citizenship.

And perhaps most indicative of how the scheme is really and truly all about the money, no more and no less, was the statement made by the concessionaire's chairman Christian Kalin, who boasted recently: 'If you have a yacht and two airplanes, the next thing to get is a Maltese passport. It's the latest status symbol. We've had clients who simply like to collect a few.'

Malta is one of 10 countries in the world that allows foreign citizens to purchase citizenship outright, and the issue, with time, will not earn us any bragging rights but, rather, an anchor around our collective neck. We are being branded as a country where just about anything is for sale, even that which citizens of any country should hold dearest.

The Organisation for Economic Co-operation and Development (OECD), which the government has consistently referred to as having endorsed the citizenship scheme, recently blacklisted Malta over it, having named and shamed 22 countries out of over 100 it studied that have either residency or citizenship programmes, for having lax rules that potentially pose high-risk to the integrity of Common Reporting Standard.

The Maltese government has proffered explanations and protestations but, at the end of the day, it is understood that the people at the OECD do not issue such findings on mere whims. In fact, Malta was also yellow-carded for its lax Residence and Visa Programme.

According to the OECD, such schemes can be potentially misused to hide their assets offshore by escaping reporting under the OECD/G20 Common Reporting Standard (CRS).

Potentially high-risk schemes [such as that of Malta, which was just one of three EU member states  named and shamed], the OECD said, "are those that give access to a low personal income tax rate on offshore financial assets and do not require an individual to spend a significant amount of time in the location offering the scheme".

The OECD's findings are bound to have ramifications, as the organisation points out, 'Financial Institutions are required to take the outcome of the OECD's analysis of high-risk schemes into account when performing their CRS due diligence obligations'.

This scheme was one of the must-haves of the Muscat government, along with other items such as a new power station and who knows what else, and it would be most interesting if the real origins of the passport scheme were to ever come to light.

Three successive Nationalist Party leaders, the current one included, have poured cold water on the scheme and the current leader has said he would cancel it should he be elected to power, with, we assume, the belief in the nation's ability to make money and garner investment without needing to resort to selling the national soul.

The European Commission is expected to issue a report soon about citizenship selling schemes, with the vast majority of Europeans either taking great exception to or recoiling in horror at the prospect of one member state effectively selling European citizenship and all that comes with it to the highest bidders.

And neither will the European Parliament let it go because, to most MEPs' minds, this is an issue that hits at the very heart of what European identity, and security is all about.

Sooner or later, push will come to shove and Malta will be forced to cancel or drastically temper the programme. But in the meantime, we can bask in a healthy budgetary surplus, which is clearly unsustainable unless we find the real talent and investment that the country needs, and deserves.

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