It was one of those ironies of history that it had to be the Socialists in the European Parliament to insist Malta is listed as a tax haven in the European Parliament’s resolution on the subject with all the consequences that follow from that.
It must have felt sweet for Nationalist MEPs to be vindicated, having been accused of treasonous behaviour by their Labour Party colleagues. If the EPP (the party that includes the PN) were to be the one demanding this declaration, Alfred Sant’s narrative would have played out perfectly.
For Labour, this is an embarrassing diversion. It confirms most solidly that Joseph Muscat no longer enjoys any influence with his former colleagues and friends in the European Parliament. It confirms the isolation of Malta’s Labour Party from its political family.
But there are short-sighted rumblings all over the financial services industry here. It does not matter who is asking for Malta to be branded as a tax haven, the thinking goes. The fact that it, is will be unfair and damaging. And it is best avoided.
All of that thinking is broadly correct. But it is also pointless.
We need to start waking up to a new political reality, in order to prepare for the economy that must follow. We have been insisting for 25 years that our financial services laws are kosher and our tax schemes legitimate.
But we have been ignoring a number of facts because it has for long been convenient to do so.
We have benefited from European integration and have seen our economy boom because of the funding and openness of the European market. But we have refused and continue to refuse to acknowledge the simple fact that without some form of harmonisation of tax rules the integration project is stalled.
These are not fantastical utopic pipe dreams. This is the simple reality that expecting other countries to pay out of their tax money to support our growth cannot be compensated by laws designed to rob them of the tax revenues due to them.
The attitude of ‘we can, therefore we should’ is just that: an attitude. And ultimately self-serving attitude is repaid with attitude.
The next real issue is that over time we have closed an eye, or two, to cowboy practices that have short-circuited the rules and allowed our operators to behave as if this was a tax haven: a centre for the laundering of money, illicit earnings and tax dodging.
As more facts emerge about money laundering through some institutions licensed here, the nuanced distinction between tax evasion and tax avoidance is sounding ever hollower. It is sounding ever more like the politician who rolled up a joint but ‘did not inhale’. Or he did not have sex with that woman because she was still wearing a dress.
The discussion with our European partners cannot remain purely legal. It is a political discussion and we must have some realistic notion of how far that can go and how effective our leverage now is after the Panama Papers, the Malta Files and the Paradise Papers revealed just how morally ambiguous (and in some cases manifestly illegal) some activities happening here are.
Saying this is but a minority of bad apples does not appease our critics. We need to own up to our apparent inability to deal with these problems and either demonstrate that we have good ideas on how to address them or ask for help.
I am entirely mindful of how many people earn their living in this business. I am entirely mindful of what a great contribution to our collective wellbeing the financial services industry makes. But to me this is a reason to re-examine carefully our next steps. It is not a reason to refuse to accept that we are going to have to walk away from the present reality before we’re pushed from it.
Our dependence on discriminatory tax advantages for non-residents is unsustainable and it has become urgent that we all accept this fact and start thinking of how to adapt to this new reality and find ways of thriving in a future that is different from the present.
I would like for the Socialists’ motion branding Malta a tax haven not to pass. I’m not too keen on Malta being branded anything. But whether it is or it is not, I’m not going to shoot the messenger. I realise the MEPs clamouring for this declaration have the interests of their constituents at heart. They resent the flow of tax revenue away from their countries and towards us.
But if we’re going to manage this as a zero sum game we show that we have understood nothing of the European project. This is not a matter of winning or losing in a battle against the rest of Europe. Framing it this way is falling for the populist, xenophobic, foreign-hating diatribes of those seeking political security by exploiting fear of the ‘enemy’.
There is a basis for negotiating a new deal out of shared interests. The expertise of our financial services centre has a global profile and the whole of Europe needs clusters of specialist financial services. The intellectual and professional capital we have accumulated here is a European treasure and I haven’t heard anyone in the European Parliament arguing for some scorched-earth policy of vindictive decimation of Malta.
You would be forgiven for thinking that, hearing some of the panicked reactions around. But it’s not the truth.
And we must remember that it is in our very explicit interest that we weed out money laundering. If there was ever an argument to sharply distinguish between the interests of Joseph Muscat and his gang and the national interest, it is this: that it is best for this nation that money laundering is frustrated, regulation is empowered, the Mafia and its money are pushed out, and the shelter for organised international crime is dismantled once and for all.
It helps us all if we did this.
Stop shooting the messengers. Listen to what they’re saying. Understand the signs of the times.
It is time for change.