Malta is no tax haven, Central Bank governor says

Malta 'not an offshore centre' but Panama revelations to cause greater attention

Malta is no tax haven, because the country provides complete transparency in exchange of information, Central Bank governor Josef Bonnici, has told MaltaToday.

But moves from the European Commission towards greater tax harmonization will influence the way Malta structures its financial services industry, if it wants to retain its competitive edge, Bonnici said.

The EC now appears strong-armed to introduce stronger laws against base erosion and profit shifting (BEPS) to low-tax jurisdictions that allow companies to reduce their tax exposure.

But Bonnici told MaltaToday he does not envisage a direct attack on Malta’s tax imputation system, which allows foreign shareholders to claim refunds of up to 85% of tax paid on dividends.

 “There is a trend to move towards greater harmonisation and not all countries are in the same position. Malta, like Ireland, is on the periphery and our particular tax structures reflect certain economic realities of where a country is located,” Bonnici said.

He warned that there will be greater emphasis on reducing offshore centres, but insisted that Malta was not one of these counties.

“Malta provides complete transparency in exchange of information and I don’t think it will be a significant factor. The greater move, however, needs to be reflected in the way we structure our financial services if we are to remain competitive.”

The island, for example, could diversify into having other products related to the insurance sector. “At the end what makes Malta competitive is the services it provides. An efficient tax system is important, but it’s not the only aspect.”

The Opposition has criticised the government over the revelations from Panama Papers and the fall-out it would have on Malta’s reputation: energy minister Konrad Mizzi was the only EU minister to have been found to own an offshore company in Panama set up by law firm Mossack Fonseca.

The Central Bank governor refused to comment on the political controversy: as a norm, the institution shies away from political issues. He reiterated that the leak had fuelled attention on tax systems and could bring about certain changes Malta would have to consider.

“We are already very conscious of our responsibilities and have a tax system that is acceptable to the rest of the world,” he says.

Explaining that offshore tax havens hide behind veils of secrecy providing a very opaque system, any changes to this affect will not influence Malta as it already employs full transparency. “This greater attempt against tax havens should not affect us.”