Malta among least secretive states

Malta registers the seventh lowest secrecy score among 71 jurisdictions assessed in the Financial Secrecy Index but its financial institutions still do not satisfy a number of transparency criteria. 

The index was issued for the first time in October by the Tax Justice Network, which actively campaigns against financial secrecy, arguing that this results in massive tax evasion on a global scale.

Malta scored 48 secrecy points out of a potential 100, which places it in the lower end of the secrecy scale. 

The FSI combines two measurements, one qualitative and one quantitative.

The qualitative measure looks at a jurisdiction’s laws, regulations and international treaties to assess how secretive it is. The assessment is given in the form of a secrecy score: the higher the score, the more secretive the jurisdiction. 

The second, quantitative, measurement attaches a weighting to take account of the jurisdiction’s size and overall importance to the global financial markets.

The most secretive country in the world is the Maldives – with a secrecy score of 92 –followed by Belize, the Turks and Caicos Islands, and the Marshall Islands.

But when the global economic impact of this secrecy is also assessed, it is Switzerland followed by the Cayman Islands and Luxembourg, which top the secrecy rankings.

Overall, Malta ranks in the 54th place, which makes it the 17th least secretive jurisdiction among the 71 jurisdictions assessed.

Surprisingly, Malta fares better than other EU countries like Germany, Belgium and Austria. But Malta is more secretive than Spain, Denmark, Ireland, the UK, Latvia and Hungary. When it comes to financial secrecy, Malta is as secretive as Spain and Italy.

Despite being one of the least secretive countries, Malta is still singled out for a number of shortcomings.

“Malta’s 48% secrecy score shows that it must still make major progress in offering satisfactory financial transparency,” the report states.

Like other countries, Malta was assessed on 15 objective secrecy criteria based on its legislation in matters like banking secrecy, control of tax avoidance and evasion and adherence to international treaties regulating money laundering. 

 Malta’s shortcomings identified

Malta was deemed to be secretive on five different criteria.

Among the shortcomings identified in the report is the lack of a public register for trusts and foundations. Malta is also singled out for not requiring “resident paying agents” to inform domestic tax authorities about payments to non-residents. 

Malta is also criticised for allowing cell companies with “flee clauses “ to operate. These clauses, known as “harmful legal vehicles”, are included in a trust document to ensure that, on the occurrence of specified “trigger” events, the trust assets are automatically transferred to another jurisdiction.

Another shortcoming by Malta is that companies listed on the national stock exchange are not required to comply with country-by-country financial reporting.

On six other counts, Malta’s performance was only deemed partly satisfactory.

Malta is reported to have “partly ratified” relevant international treaties relating to financial transparency. Malta is also deemed to “partly comply” with international money laundering standards.

Malta is also reprimanded for “not adequately curtailing banking secrecy”.

The report gives Malta a satisfactory score on four counts out of 15.

One positive aspect is that Malta avoids the promotion of tax evasion via a tax credit system. Another positive aspect is that the company accounts are on the public record. 

Malta is also deemed to cooperate fully with other states on money laundering and other criminal activities.

Despite its shortcomings, Malta is considered to be a tiny player in the global market for offshore financial services accounting for less than 1% of the market.

By ranking secrecy, jurisdictions according to both their secrecy and the scale of their activities, it allows a politically neutral ranking of the biggest players.

The Tax Justice Network

The secrecy ranking is an initiative of the Tax Justice Network, an independent organisation launched in the British Houses of Parliament in March 2003. It is dedicated to high-level research, analysis and advocacy in the field of tax and regulation. It focuses on the harmful impacts of tax evasion, tax avoidance, tax competition and tax havens.

The Tax Justice Network estimates that at least $250 billion is lost in taxes each year by governments worldwide, solely as a result of wealthy individuals holding their assets offshore. 

“It’s not just developing countries that suffer: European countries like Greece, Italy and Portugal have been brought to their knees by decades of secrecy and tax evasion”.

Secrecy jurisdictions, compete to attract illicit financial flows of all kinds, with secrecy as one of the most important lures.

“A global industry has developed where banks, law practices and accounting firms provide secretive offshore structures to their tax dodging clients,” the organisation claims.

 READ MORE @ Financial Secrecy Index