Michael Briguglio's Blog

Monday, December 18, 2017

Gamble on Malta's reputation - Michael Briguglio

Times of Malta 18 December 2017

The Labour government’s lack of good governance has captured attention on vital sectors of the economy such as finance. Needless to say, the brutal murder of Daphne Caruana Galizia switched on the red lights, confirming that not all is well behind Joseph Muscat’s smile and press statements.
Indeed, the Socialist (S&D) European Parliamentary grouping, which the Labour Party forms part of, considers Malta and some other EU member states to be tax havens. Together with the smaller Communist and Green European parliamentary groups, the socialists attempted to pass a vote in this direction. Eighty-seven per cent of socialists (excluding Malta Labour MEPs), 88 per cent of communists and 98 per cent of greens voted in favour of this proposal.
As we know, the vote was not approved by a whisker. This was mainly due to the opposition of European People’s Party (EPP), which also comprises the Nationalist Party and the smaller Liberal (ALDE) and the Conservative and Reformist (ECR) parliamentary groups. Indeed, the percentage of MEPs in these groups which opposed the socialist-communist-green proposal read 86 per cent, 83 per cent and another 83 per cent respectively.
The EPP and its allies are therefore emphasising that Malta is not a tax haven, but MEPs in such groups have highlighted that the Labour government is exceeding limits in certain areas. These include the selling of EU citizenship and the lack of action on Panama Papers and rule of law.
The EPP has also emphasised that fair tax competition within a harmonised EU-wide tax system should not be confused with money laundering and tax evasion.
It is indeed regrettable that Muscat’s government is adamant not to tackle the mess of its own making. It is crystal clear that the interests of Keith Schembri and Konrad Mizzi, who were both involved in Panama Papers and various shady deals, are more important than the longer-term collective interests of workers in the financial sector.
And while Pilatus Bank has hit the headlines for the wrong reasons, workers in the industry are worried that offices of other financial actors could pack up and leave due to Malta’s sinking reputation. Should this be the case, 20 years of hard work into building this industry would be at risk.
Indeed, the financial services sector is an important contributor to Malta’s economic and wage growth. The sector includes investment services, insurance, trusts and pensions, and more than 53,000 companies are registered in our country.
Malta developed sound legislation and regulation, and this was also thanks to cooperation by the then-Labour opposition which opted for consensus rather than partisanship.
The post-Brexit scenario can offer further opportunities for Malta in this sector, but what we have is a government defending what cannot be defended.
Muscat’s recent statements on rule of law can only be interpreted as public relations spin if no action is taken with regard to Panama Papers, to the protection of whistleblowers, to Pilatus Bank, to money laundering, to the secretive cash-for-passports scheme, to the non-transparent energy and health privatisation processes, and to the independence of institutions such as the police and the Attorney General.
The government’s hardheadedness is also elbowing out the need for discussion on a national position on financial services. For example, it has to be made clear that the involvement of government officials in Panama Papers is one thing, but the fundamentalist approach to streamline the EU into one single tax band is another.
Instead, we should learn from the EU’s successful climate change policy. The bloc has a single target, but different member states have specific targets depending on their circumstances. If this is transposed to the financial sector, one can argue that this is an important niche for small economies which deserves recognition, provided that clean governance and adherence to rules are in play.
But again, Muscat’s government is abusing Malta’s niche. And while the Prime Minister can then reap benefits of his political investment when he leaves office, it is Maltese society as a whole that will pay the price for irresponsible governance.

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