Panama company raises more questions about Mizzi trust set-up

Energy minister Konrad Mizzi is facing pressure to explain the exact circumstances in which his family registered a trust in New Zealand, which – he revealed yesterday to MaltaToday – also owns shares in a Panama company.

The trickle of information released by Mizzi, who today will be elected Labour’s new deputy leader for party affairs, so far confirms two aspects of the set-up: that the vehicle his family will use to manage their properties in London and Malta, and any investments they hold, uses two secretive tax jurisdictions.

“The trust currently owns shares in a company which is currently dormant and is registered in Panama, a jurisdiction which was suggested to us by our advisers,” Mizzi told MaltaToday in the only insight offered so far on the set-up.

“This company has never been used and has no assets or liabilities. This pre-established shell company which has never traded, was acquired off-the-shelf in 2015 from the service provider,” Mizzi said, suggesting that the company existed before 2015 but had since changed names or ownership – a practice employed by tax specialists who purchase dormant companies to be used by potential clients.

Mizzi denied that the New Zealand trust had any bank accounts and that it would be used to hold his family’s property and inheritance.

He has now committed himself to declare the trust in his parliamentary declaration of assets for 2015, but also update the contents of the trust in his future declarations. “I have always strived to hold myself to the highest standards and will continue to do so,” Mizzi said in a statement he released to MaltaToday.

Panama: bad reputation

While Mizzi has set much store by the fact that New Zealand – like Malta, whose government he is a minister of – is a stable parliamentary democracy, he has yet to answer as to why his advisors, Nexia BT, would have suggested New Zealand and Panama as an ideal set-up to manage the family assets of a politically exposed (PEPs) couple.

Mizzi himself is responsible for multi-million national projects, not least the LNG plant whose ownership will include non-EU players such as SOCAR, the Azerbaijan state energy company; while his wife Sai Mizzi Liang was made consul to Shanghai after first being controversially appointed as trade consul by Malta Enterprise back in 2013.

Which is why the absence of spousal declarations from Labour’s reworked ministerial code of ethics already raises the urgency of reintroducing this PEPs safeguard in the code of ethic. Joseph Muscat yesterday took comfort with the fact that Mizzi had disclosed the trust while submitting his draft declaration of assets, but that is only the tip of the iceberg.

New Zealand already offers the greatest advantage of all: there is no tax on offshore earnings held by the trust, and no capital gains tax on assets held within the trust because the Mizzis are not New Zealand residents.

But the political red flag is that Mizzi has to yet to justify the choice of Panama, a Central American tax haven, when Malta already offers a top-tier regulatory environment for trusts and holding companies.

Which is why The Tax Justice Network, whose activists fight tax havens and publishes a Financial Secrecy Index, ranked Panama 14th in its 2015 index with a high secrecy score of 72.

“Coming within the top twenty ranking, Panama remains a jurisdiction of particular concern,” the TJN says of a jurisdiction that is tarnished by dirty money from Latin America and the USA. Only recently did it enact a law on the exchange of information when requested by law.

“It is one of the oldest and best known tax havens in the Americas. In recent years it has adopted a hardline position as a jurisdiction that refuses to co-operate with international transparency initiatives.”

Panama has over 350,000 secretive International Business Companies (IBCs) registered: the third largest number in the world after Hong Kong and the British Virgin Islands. Violation of financial secrecy is punishable by prison.

“Overall, Panama remains a jurisdiction of extreme concern for TJN, and its rank at 14th position in our 2015 Financial Secrecy Index probably understates the harmful nature of Panama’s offshore activity since a significant proportion – such as its shipping registry – is not covered by the IMF data that we use to construct our ranking,” the TJN said.