The deadly Coronavirus has taken the world by surprise; yet many hope that the new prime minister will find the courage to take the bull by the horns and start a strategy of medical defences to this menace.
While other EU countries have not escaped institutional scandals, Malta was unduly shocked by the murder of a leading journalist three years ago. The ongoing inquiry reveals allegations that the murder plot was linked to top political members at Castille.
This has shaken our faith in police prowess and justice ministry. Are they fully geared to protect us? Traditionally, we believe they were effective to keep out the bad wolf. Recent events culminating in three resignations of top ministers including that of Joseph Muscat - prime minister, has rocked the boat and left everyone gasping what to expect next when Pandora's box is opened.
The arrest of one of Malta's wealthiest businessmen on suspicion of complicity in the journalist's murder is giving the plot an evil twist. As they say - it does not rain - it pours. The reputational damage is exacerbated by the forced closure of three local banks. These were small private banks - Nemea, Satabank and an Iranian owned bank - Pilatus. The recent reprimand on Bank of Valetta by the ECB over AML and governance issues did send shock waves since this bank is run by a chairman appointed by the government (the latter being its largest shareholder). All these factors have taken their toll on public opinion while we are still feeling the cold blast of negative publicity following the disclosure of Panama companies in 2015 registered by Nexia BT (representing Mossack Fonseca) destined for top government officials. This year, expect a concerted effort by constituted bodies urging the new prime minister to wipe the slate clean (and administer surgery, not palliatives).
Angry protest groups have taken to the streets in the run-up to Christmas - baying for justice. The macabre assassination of journalist Daphne Caruana Galizia is an attack on democracy - she wielded a poison pen in a regular blog which specialized in exposing financial crime and corruption in high places. In a democracy, we respect freedom of speech and the rule of law. But such rights can be abused and stretched absurdly like a rubber band.
As always, the common good must prevail over partisan pique, which if used and abused can ruin the sense of fairness and the ethical core of this island. Needless to say, any country must seek long-term solutions over political jockeying. Recently, Guy Verhofstadt, leader of the Alliance of Liberals and Democrats for Europe, said on Twitter that corruption in Malta seems to be widespread and has become a profitable business model.
Such remarks do not help Malta Enterprise or FinanceMalta in their drive to attract new business. It is high time that next year, we initiate serious reforms to rebut this haemorrhage of criticism, branding us as a centre for corruption, a Mecca for Mafia gambling thugs, money laundering, abuses in overtime claims by the traffic police and a dubious tax haven.
Another scary story involved tax evasion by a US multinational - Amazon. It has been ordered to repay €250m in illegal state aid to Luxembourg, as EU authorities continue their campaign against sweetheart deals that help big corporations evade taxes. Luxembourg's "illegal tax advantages to Amazon" had allowed almost three-quarters of the company's profits to go untaxed, allowing it to pay four times less tax than local rivals. Not surprisingly, Amazon rejected the findings of the investigation.
More recently, the "Cum-Ex" scandal revealed how an organised group of bankers had appropriated over €55 billion from the public funds of several Member States, notably France and Germany, over the past 15 years through the so-called Cum-Ex deals. Put simply, the inspections revealed how bankers, lawyers and other intermediaries were trading shares and receiving reimbursements for tax that had never been paid.
The scandal came to light in 2016, when it emerged that several German banks had exploited a legal loophole which allowed two parties simultaneously to claim ownership of the same shares. This involved banks and stockbrokers rapidly traded shares with ("cum") and without ("ex") dividend rights, with the aim of being able to conceal the identity of the actual owner and allow both parties to claim tax rebates on capital gains tax that had only been paid once.
Having mentioned some of the more glaring peccadillos of competing financial centres, one cannot but admit that Malta has over the years painstakingly built a good reputation. The water turned murky by the recent revelations of the slain journalist and other scandals of Electrogas, Vitals Health Care among others. We must act contrite and apply surgery to sever any cancerous growth in our body politic and other state institutions. Typically we find a number of recommendations mandated in a recent Moneyval inspection.
Perhaps a good start is to reform our regulatory arsenal by recruiting new chiefs. Not so easy as incumbents (mostly persons of trust) prefer to maintain the status quo. Ideally the media has to unite and drop any political blinkers in an effort to portray a more balanced judgement when discovering a bad apple in the barrel. It is a pity, that having reached full employment and even registered a modest annual surplus, party sympathizers are reluctant to forgo tribal loyalties. Ideally they focus how best to prune the orchard of its decayed branches.
On a positive note, we thank heavens for what we achieved so far. Since Independence, governments in office have succeeded to strengthen the economic pillars. United in our resolve to fight both the Corona virus and restore our financial reputation.
George M. Mangion is a senior partner of an audit and consultancy firm, and has over twenty-five years' experience in accounting, taxation, financial and consultancy services. George can be contacted at [email protected] or on +356 21493041.