‘Surreal’ is definitely the right word

On one thing I certainly agree with Simon Busuttil: the Panama scandal has taken a decisive turn for the ‘surreal’. 

Even the reasons given by the Opposition leader are by and large correct. It is indeed ‘surreal’ for Konrad Mizzi to so blithely shrug off calls for his own resignation… and for his government to forge ahead while (apparently) ignoring both the scandal and the increasing impact on Malta’s international reputation. 

But this is not the only ‘surreal’ aspect. Last week, for instance, Busuttil declared he would go ahead with last Sunday’s public protest calling for the removal of Konrad Mizzi… even if Mizzi were removed from office before Sunday.

Work that one out if you can. A protest calling for the removal of… whom, exactly? The guy who’s already gone? Isn’t that a little… pointless?

It would, of course, really be pointless… if the removal of Konrad Mizzi were the only objective behind that protest. As far as the Opposition is concerned, however… Konrad Mizzi seems to no longer even be the issue at all. Nothing less than the total collapse of the present government, to be replaced by a Nationalist government (with Busuttil himself in the driver’s seat), is now very clearly the target. And fair enough, I hear you say. He is, after all, the Opposition leader. It is perfectly natural that he would seek to topple the ruling party, and all that.

True enough; but what makes it surreal is that Simon Busuttil – and indeed most other people commenting publicly on this issue – seems to have already lost sight of the actual core issue at stake. Tax avoidance. This, ultimately, is the issue that has caused genuine scandal (as opposed to artificial scandal, which is what happened here) in Europe and elsewhere. The Panama Papers provided insight into how the wealthy (in and outside of politics) use notoriously secretive tax jurisdictions like Panama to hide their earnings: both to avoid paying tax, as well as to conceal the provenance of their assets.

If Mizzi is facing calls for resignation, it is not so much because he has indeed avoided tax: this is actually the one thing that cannot be satisfactorily established, precisely because of the degree of secrecy in the way he engineered his overseas trust fund. No, he faces criticism and controversy for the same reason that all ministers and public officials fall into disgrace when they open companies and/or bank accounts in notoriously non-transparent jurisdictions. 

As a public official who handles government transactions, his personal assets have to be subject to public scrutiny (for reasons which are too obvious to bother spelling out).

Strangely, however, nobody is really talking about this anymore. At Sunday’s protest, Busuttil’s speech was limited by and large to resounding declarations such as ‘Muscat has lost moral authority’, etc… without ever telling us exactly why or how.

There is a reason for Busuttil – and nearly everyone else in this country – to wish to avoid the actual nature of the controversy staring us all in the face. But I’ll come to it later.

For the moment, consider how very differently the rest of Europe reacted to the Panama Papers. Apart from similar calls for resignations (eg, Iceland, the UK), there have also been widespread demands for a reform of European tax policies. Everywhere but Malta, you hear arguments in favour of tightening controls on how (and above all, where) European companies pay their taxes. Because unlike Malta, it seems, the rest of Europe actually cares about what this scandal has actually revealed… and not merely about the protagonists, which is all that seems to matter here. 

After all: what good would Cameron’s resignation serve in the UK… if his replacement were left free to do exactly the same thing in turn? This is why the debate in Britain – and elsewhere in Europe – has shifted towards what sort of legislation could be imposed to ensure greater tax transparency.

In Malta? Not so much. In fact, for all the howls of protest we heard last Sunday, there has been deafening silence on the issue of tax reform. By my count, the only person to have alluded to it in any way was (unsurprisingly) Josef Bonnici, former finance minister and governor of the Central Bank. 

Bonnici pointed out that the Panama Papers are likely to “increase pressure at EU level for greater tax harmonisation… and would also accelerate moves in the EU to control situations where companies shopped around to get away with paying low taxes.”

Got that, everyone? The EU sees ‘companies shopping around to get away with paying low taxes’ as an intrinsic part of the problem. And that, in a nutshell, is Malta’s entire economic strategy… which is a policy shared by both major parties.

Hence the surrealism. The Opposition claims to be ‘shocked’ at Mizzi’s behaviour… but not at all ‘shocked’ at the idea that Panama should tailor its tax legislation precisely to attract these kind of shady investments. ‘Tax avoidance’, in itself, is not the source of this scandal. Certainly it was not the reason the PN held its protest last Sunday: Busuttil never even mentioned the topic once.

And when Nationalist (and Labour) do ever talk about tax avoidance, it is largely to defend Malta’s role as a major objector to tax harmonisation at European level. Roberta Metsola, for instance – who attended Sunday’s protest – recently wrote a whole article about the need to defence Malta’s tax regime.

“Not being able to control the level of taxation for companies based in Malta would make us lose our competitive edge, endanger thousands of jobs and damage our economy at a time when we need to do all we can to remain competitive,” she wrote. 

Significantly, she added: “Former finance Minister Tonio Fenech fought successfully for years to keep larger countries from introducing similar systems for the entire Union and it is good to see that our current Minister for Finance has followed in his footsteps and not changed this policy.”

One can very easily imagine Panama or the British Virgin Islands resorting to identical arguments to defend their own tax policies. It is not just Malta that ‘needs to remain competitive’; and I am pretty sure that lots of jobs and investment would also be lost, if these countries were somehow forced to make their legislation more transparent.

Is this a good enough argument, however? Take Malta’s I-gaming industry, for instance. In other countries (not just the EU), such companies face exorbitantly high tax rates because they are perceived – not unlike cigarettes, alcohol, etc – to encourage a vice that literally impoverishes people around the globe. I won’t go into the morality argument myself… I am certainly not going to turn this into a sermon against ‘vice’. 

But the fact remains that, where other countries tighten their tax regimes to discourage such industries… spotless, virgin little Malta flings its doors wide open, in the hope of welcoming as many fiscal castaways as it can.

Busuttil has no qualms about this… neither does Muscat. Both effectively accept as ‘normal’ the conditions that other European countries (as evidenced by reactions to Panamagate) regard as suspicious or downright WRONG. 

It is only when one side or the other smells the opportunity of a political trophy – a scalp to affix to its battlements - that it suddenly becomes ‘scandalous’ to ‘shop around’  for countries which tweak their tax regimes to attract unsavoury investments.

At all other times, it is just Malta’s economic and fiscal strategy in action.