Plan B

More than a year ago I said  that there needs to be a Plan B for the financial services industry. I had said that new services which move away from those such as ‘fiduciary services’ and letterbox company services, which with all the thick documents of regulation are magnets for shady business and criminal kleptocrats.

During a KPMG conference, back in 2015 there was talk about countries which will move to protect their tax base. Subsequently we had stories of huge multinationals which do not pay taxes in countries where business is done but manage to siphon off profits as ‘fees’ to letterbox companies in countries such as Luxembourg, the Netherlands and Malta. There are whole reports about IKEA and BASF and how these evade the taxman.

Now one might argue that as a country we need this business. That although it is based on what amounts to legally sanctioned tax evasion the industry amounts to 25% of our economy. What those who go on and on about this fail to mention is that it is not up to us to regulate what happens in other countries. Should the German government decide to crack down on say German giant BASF and insist on recouping lost revenues amounting to billions of euros it will find the ways and means to do so – whatever we say, whatever we do.

Does anybody in their right mind think that these kinds of extremely creative accounting could go on forever? What those who rant on and on about the economy forget to say is that it is highly irresponsible to let the economy develop in a way which is dependent so heavily on only one sector, especially a sector based on unethical services which one day or another would have to either go or be radically reformed.

Then there is the issue of fiduciaries which are huge magnets for organised crime and the international kleptocracy. From Azerbaijani kleptocrats, to Russian loan sharks, to the Italian mafia. For all the talk about a ‘serious’ and ‘well-regulated’ system we are now learning what we’ve known all along. The only new thing is that things are worse than we could have imagined. What happened with Konrad Mizzi and Keith Schembri and the Panama Papers leaks – through which the two were caught out opening companies in Panama, which companies are obviously opened to obscure huge amounts of money from secret sources, happens in Malta as well. It is hypocritical to make a song and dance regarding Panama stealing our tax money, money which would go to pay for public services such as health and education, and then sing from another hymn sheet when others steal other countries’ tax money using Maltese financial services. 

The principle should be one: tax on profits should be paid where profits are made. Each country should retain the right to set its own tax rates on profits made in the country. Fiduciary services are magnets for criminal organisations, such as those involved in Capital One Investments  Limited, with which Beppe Fenech Adami was for a time associated. They must go. The coffee has been brewing for ages now. About time that Edward Scicluna, Joseph Muscat, the PN who are still ranting and raving about the industry and the deniers who think that things can go on as usual, take a real deep breath.

Ralph Cassar is an AD candidate on the seventh and 11th districts