Malta: When a Tax Haven Turns into an Offshore Hell

Watch out for the Panama Papers committee visit to Malta. Tomorrow, Monday 19 February, Members of the European Parliament Inquiry Committee into tax avoidance, tax evasion and money laundering will travel to Malta to meet with politicians and institutions who were involved in the Panama Papers scandal. The MEPs are expected to voice harsh criticism on Malta’s tax and anti-money laundering regime and certain high-profile figures that were involved in the leak.

High-profile political figures were involved in the Panama Papers

The visit comes amid a heated debate over the current government. A demonstation against corruption by the opposition party tomorrow is targeted at what has been called the „the most corrupt government in the country’s history“.

Two prominent figures were involved in the Panama Papers: Konrad Mizzi, minister for energy and health, and Keith Schembri, the Prime Minister’s cheif of staff, were both found to have created offshore structures over Mossack Fonseca. Especially the opposition party has criticised the government. It pushed for a motion of confidence twice, organised protests in the streets and called for Mizzi to step down as a Minister. Neither Schembri nor Mizzi have left their office up until now.

Konrad Mizzi Offshore.jpg
Konrad Mizzi’s offshore company Hearnville (Source: ICIJ Offshore Database)
Keith Schembri Offshore.jpg
Keith Schembri’s offshore company Colson Services (Source: ICIJ Offshore Database)

Meanwhile, an investigation into the case by the Financial Intelligence Analysis Unit, the institution in charge of investigating alleged cases of tax fraud and money laundering, came to a halt when the director, Manfred Galdes, resigned. His resignation came shortly after the Police Commissioner, who had the final say over whether to carry on with the prosecution or not, also stepped down. Appearantly, he had received a confidential report by Galdes on the case of Schembri and Mizzi just before.

The European Parliament pushes for ‚tidying up this whole mess‘

The European Parliament’s inquiry comimttee PANA has sent a delegation to investigate the case. Some MEPs have condemned the whole issue. Sven Giegold, coordinator of the committee said: „This is all very embarassing. We will raise this whole mess in the Panama Papers committee. Malta has to get serious. It has to tidy up in order for the whole European financial infrastructure to gain credibility“.

But Maltese politicians have proven not to be very cooperative. Earlier this year, the Minister of Finance Edward Scicluna already refused to come to a meeting with the PANA committee in the European Parliament. Now, Konrad Mizzi accepted only very late an invitation to meet the European Parliament delegation, whereas Keith Schembri has not responded yet. Other invited people declined the invitation, such as are the managing partners of Nexia BT, Brian Tonna and Karl Cini, who had helped Mizzi and Schembri to build their offshore structures.

Malta denounced for being a tax haven

In addition to the Panama Papers leak, Malta is facing allegations of encouraging tax avoidance. Only days before the delegation arrives, the Süddeutsche published (on page three!) an article on how Malta hosts letter box companies for numerous German companies and rich individuals as well as luxury boats, which are almost not taxed there. (The timing is not a coincidence…).

Earlier this year, the Greens in the European Parliament published a study on ‚Is Malta a Tax Haven?‘. And their answer is yes: According to a list of indicators set up by the European Commission, Malta would be the fourth worst offender with regards to facilitating aggressive tax planning. The study was published shortly after Malta took over the Presidency Council. There is a lot of concern that Malta will keep a low profile on tax issues, whereas the Commission has just proposed an ambitious package of tax reforms aimed at reducing tax avoidance in the EU.

An opportunity for the European Parliament to affirm itself

The atmosphere in Malta is heated. A lot of reciprocal criticism was raised between the two main parties, and journalists, such as the infamous blogger Daphne Caruana Galizia, have persistently denounced the involvement of politicians in the Panama Papers scandals. Meanwhile, the European Parliament is determined to exert pressure on a country that is reluctant to reform its tax system.

The visit of the PANA committee is very promising. Key figures who were involved in the Panama Papers have accepted invitations to meet the Members and will have to defend their involvement. It will be serious opportunity for the European Parliament to affirm itself as an influential actor in European politics.

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