Different parties, same stinking fiscal system

Anybody observing Maltese politics these past few decades will surely have noticed a small anomaly by now. If not... well, it would certainly explain a lot about why Malta’s political model has clearly failed us, and continues to fail to this day.

On paper, our political scenario is supposedly split down the middle. With each election, we are presented with a ‘do-or-die’ scenario where only ‘one party’ – which one, naturally, depends on your political perspective – can possibly save us from the mess created by the other. 

Yet in several key policy areas, ranging from the very minor to the very major... there is simply no difference at all between the Labour and Nationalist parties. Hunting and trapping, for instance. It may seem a small matter amid such weighty affairs of state, yet for anyone hoping to base their vote on this issue – in this, or any other election – there quite simply isn’t even a foothold to latch onto. Both parties are firmly in favour of retaining a derogation on spring hunting; both propose securing another derogation on trapping. Whatever the election outcome, Malta’s official policy will be exactly the same.

Same goes for a wide variety of other issues. Malta’s construction and development policy. Both parties are in favour of boosting this sector, and both have proved willing to bend the rules to facilitate matters for developers (in exactly the same way, too: extending development boundaries, tweaking the environmental rules and regulations, weakening planning institutions, etc). Unsurprisingly, both also have a history of accepting undeclared financial contributions from leading developers... though they both regularly accuse each other of the same misdemeanour. So again: whatever the election outcome, we will have a government that is indebted to the construction sector, and which will unashamedly use its power to pay back those financial contributions in kind.

Meanwhile, this particular election seems to be eroding what few policy differences still seemed to exist between the two parties until now. Drugs. Responding to clear electoral trends, both Labour and PN have reinvented their respective drug policies – crossing the Rubicon from ‘zero tolerance’, to a willingness to legalise soft drugs for personal use. And on civil liberties, both Joseph Muscat and Simon Busuttil have backpedalled from clear personal positions against gay marriage, and now believe in total marriage equality. 

Sticking to this particular issue (and others that push the same buttons: IVF, embryo freezing, etc.), this creates an uncomfortable street-level reality. I may not have much automatic sympathy for the hardcore Catholic lobby-group currently taking out newspaper ads to resist gay marriage. But I must concede they have a point. They’re not the ones being inconsistent here. And if the political mainstream converges on issues that represent fundamental electoral principles to this category... it is to be expected that they will eventually give up on both parties, and possibly form a new one. 

There is, in brief, a limit to how minutely the two parties can come to resemble each other on key policy areas... before accidentally eroding the premise on which our entire political duopoly is supposedly based: i.e., that not only is there a profound difference between the two parties... but it is a difference of crucial urgency in every election. 

This brings us to the greatest anomaly of them all. Incredibly, given the nature of the allegations underpinning this election... both parties also converge on our national fiscal policy. They both have consistently argued that Malta should retain sovereignty over its tax regime... not only that, but (somewhat bizarrely) both claim to be the best positioned to defend Malta’s financial services sector from ‘unprecedented concerted attacks’.

Sorry, but at this point the contradiction becomes too blatant to ignore. Malta’s financial sector depends to an enormous degree on a favourable tax regime that would not be possible if Malta loses its tax autonomy. The Malta Files have revealed the extent to which our favourable tax rates attract some of the dodgiest financial structures in the world to set up shop here. Not that we really needed a data leak to tell us that... but it helps to get a clearer picture of exactly where Malta’s current economic boom is actually originating from. 

Make no mistake: a great chunk of it arises from tax avoidance in other countries... and ‘tax avoidance’, along with money laundering, was the core issue underscoring the Panama Papers scandal last year (albeit with respect to Panama, not Malta).

It must be conceded that there is a difference between our own fiscal set-up and Panama’s (or the Cayman islands, Bermuda, etc). Though aimed in broadly the same direction, Malta’s tax incentives are not ‘hidden’: they are technically above board, having been approved by the European Commission.

I won’t go into the obvious hypocrisy at European Union level: suffice it to say that the EC’s president was embroiled in almost identical scandals over Luxembourg... and other EU member States (namely, Ireland and Cyprus) feature in a list of the 10 most dubious tax regimes in the world, where Malta does not.

But I’ll save all that for another day. It is our own hypocrisy that interests me at the moment. On one level, this election has shaped up to be a ‘referendum’ on our national habit of exploiting international tax loopholes... yet on the other level, both sides of the political divide promise that they will continue defending Malta’s right to do precisely that... i.e., to defend a fiscal scenario which has enabled our little country to make a killing by positioning ourselves as a tax dumpsite for all the world’s most dubious businesses.

This casts a shadow over all the fine-sounding promises of moral rectitude we have been hearing of late. A change in government, it is now argued, is the only thing that would save our ‘country’s international reputation’ from the miasma of scandal it is now in.

Recently, I have been told that I just don’t use enough bad language in my articles anymore. So here you go: Bullshit! The system is the problem, not the administration of government we choose to administer it. And the system – our nasty national habit of exploiting tax loopholes to create wealth for ourselves – is just one of the many things that will NOT change, regardless who wins this election.

To qualify as a viable and consistent political argument, the emphasis should really be on voting for that party that pledges to take this bull by its horns once and for all... i.e., to dismantle the tax incentives that enable the world’s wealthiest (and dodgiest) to pay less tax in Malta than elsewhere, and bring ourselves in line with what is considered a fair and just taxation system the world over. In a word, that means the party that would actually embrace a common European fiscal policy, instead of consistently resisting it tooth and nail... as both PN and PL have done to date. 

Of course, there is a flipside. Our ‘historical, unprecedented economic growth rates’ would also shudder to a halt. It would mean we go back to what we have always been throughout our history: a microscopic little country, struggling against enormous odds to keep our heads above water (sometimes managing, yes, but sometimes... well, you get the picture).

Does that scenario frighten you? Personally, it doesn’t frighten me in the least. I do that in my personal life anyway. Sometimes I keep my head above water; sometimes... guess what? I fail. So be it. I would be all in favour of re-dimensioning my country’s expectations along exactly the same lines... if only that option was actually on the table. 

But the rest of you? Especially those among you who are somehow, in any of a million ways, plugged into the same system yourselves? Don’t all speak at once. Oh, and make sure you fully enjoy voting for a choice of identical two parties, that promise to retain and defend precisely the same stinking fiscal system you’re all currently complaining about. 

I’d be the last person to rob you of that prerogative, believe me...