Did Malta start late in the race for Ci­ti­zen­ship by in­vest­ment?

Malta Independent - - BUSINESS & FINANCE -

Mr Man­gion is a se­nior part­ner of PKF an au­dit and con­sul­tancy firm, and has over 30 years ex­pe­ri­ence in ac­count­ing, tax­a­tion, fi­nan­cial and con­sul­tancy ser­vices. He can be con­tacted at gmm@pkf­malta.com or on +356 21493041.

The scheme is so pop­u­lar with Chi­nese ap­pli­cants, which awards about 10,000 visas an­nu­ally against the pay­ment of about $1 mil­lion each in ap­proved schemes which prom­ise to cre­ate a pre­scribed level of em­ploy­ment – the so-called Green card. Smaller states have of­fered a more di­rect route to ci­ti­zen­ship without or on the ba­sis of very limited res­i­dency re­quire­ments in­clud­ing Cyprus, Do­minica, St Kitts and Ne­vis, Ire­land and sev­eral Pa­cific Is­lands – prac­ti­cally none ex­pect a com­pul­sory pe­riod of res­i­dence of 12 months (as is the case in Malta). Most de­mand ap­pli­cants to pay an ini­tial visit to sub­mit per­sonal bio­met­rics data.

The IIP scheme was pro­posed in October 2013 and was fiercely crit­i­cized by the Op­po­si­tion leader. He solemnly de­clared that his party would not sup­port the “sell­ing of pass­ports” be­cause in his opin­ion this was “im­moral” and equated to the “sell­ing of Malta’s soul”, adding that this was be­ing done without the proper mea­sures be­ing taken on board. The Op­po­si­tion leader ob­jected to the early ver­sion of the scheme say­ing that there was no link to res­i­dency and there­fore the ap­pli­cant was not man­i­fest­ing any wish to re­ally sup­port the is­land. A lo­cal MEP from the cen­tre-right Euro­pean Peo­ple’s party was quoted by the Fi­nan­cial Times as say­ing: “The sale of ci­ti­zen­ship without any tan­gi­ble con­nec­tion to a mem­ber state is some­thing that is of con­cern. Euro­pean ci­ti­zen­ship con­fers cer­tain rights which should sim­ply never just be put up for sale.” She said that such schemes raised ques­tions “par­tic­u­larly in terms of trans­parency and se­cu­rity for this to be vi­able in the long term”.

Three years down the line, Iden­tity Malta pub­lished a growing list of 134 ac­cred­ited agents, plus Hen­ley& Part­ners, all clam­our­ing to ad­min­is­ter the scheme. It in­cludes a law firm whose part­ner is the pres­i­dent of the party in Op­po­si­tion and it sports top names from the Big Four au­dit firms, not for­get­ting the name of an ex Speaker of the House of Par­lia­ment in the pre­vi­ous ad­min­is­tra­tion. The lat­ter is re­puted to have hit the jack­pot as he at­tracted a sub­stan­tial num­ber of wealthy ap­pli­cants not sur­pris­ingly due to his vast po­lit­i­cal con­tacts when he was Speaker of the House. This may seem pure envy com­ing from the writer (him­self an agent) but re­ally and truly it con­trasts with the bois­ter­ous re­mark in a web­site by a le­gal firm that it proudly holds the un­en­vi­able po­si­tion of be­ing the first on the agents reg­is­ter.

Read­ers may ask why the Malta gov­ern­ment risked so much bad pub­lic­ity by of­fer­ing the IIP scheme when the econ­omy was do­ing well and the level of em­ploy­ment was re­spectable. There is no easy an­swer to this ques­tion... cer­tainly the scheme had cre­ated a deep chasm among the po­lit­i­cal class, as the ones who pre­ferred to keep the sta­tus quo chose not to risk at­tract­ing ap­pli­cants, mostly un­known rich pa­trons who may in the end never re­side or even fully par­tic­i­pate as real cit­i­zens. Prag­ma­tists on the other hand pointed out that over the past years a debt moun­tain had ac­cu­mu­lated and needed to be re­paid.

It is re­as­sur­ing that the 2017 bud­get con­tem­plates that the debt to GDP will be re­duced to ac­cept­able lev­els to reach 60 per cent in two to three years’time. We know that debt av­er­ages the six-bil­lioneuro mark – a fig­ure reached net of pro­ceeds from pri­va­ti­za­tion of the lion’s share of our fam­ily sil­ver. This debt re­sulted from ini­tia­tives such as bail­ing out the ail­ing Dry­docks, ship­build­ing, re­pay­ing the China dock loan, Air Malta, the BWSC plant, re­pair­ing roads, main­tain­ing growing wel­fare pay­ments and salaries of 48,000 civil of­fi­cers. Surely we feel grate­ful that the gov­ern­ment has taken a prag­matic step to re­duce the deficit and slowly build up a Na­tional Devel­op­ment and So­cial Fund – ad­min­is­tered by an in­de­pen­dent board of trus­tees. In the end, the EU had ap­proved IIP scheme but im­posed a one-year res­i­dency re­quire­ment. and al­though com­par­isons can be odi­ous, one can­not help re­mark­ing that the same con­di­tion does not ap­ply to Cyprus, Spain, Aus­tria and Por­tu­gal.

The scheme comes with an obli­ga­tion to pay the state a non-re­turn­able sum of €650,000. The Hen­ley and Part­ners 2015 an­nual re­port made favourable com­ments about Malta scheme which it placed in the top 10 global rat­ing. It has raised over €1 bil­lion in cap­i­tal since its launch which in a short lapse since its in­cep­tion may su­per­sede the EU funds granted as aid for seven years. To their de­light, ac­cred­ited agents and Hen­ley & Part­ners have mar­keted the scheme in var­i­ous fora and this in­cluded the ap­pear­ance of the prime min­is­ter who met with en­cour­ag­ing de­mand from a growing list of high net worth in­di­vid­u­als in China, Rus­sia and Mid­dle East­ern coun­tries to in­vest in an in­di­vid­ual in­vestor pro­gramme (IIP). So far it ap­pears that the ma­jor­ity are com­ing from Rus­sia and other exCom­mu­nist coun­tries but sur­pris­ingly one notes a smaller num­ber of US mil­lion­aires who plan to reg­is­ter as per­ma­nent res­i­dents and in the process re­nounce US ci­ti­zen­ship. If prop­erly done, they can claw out of the US world­wide in­come tax net.

Sud­denly, we dis­cover that Cyprus is also com­pet­ing for the rich and pow­er­ful, but does not oblige ap­pli­cants to re­side for one year like we do. Cyprus prom­ises a pass­port within three months and equally gives free­dom of move­ment within the Euro­pean Union/the Schen­gen area and all this com­ple­ments the ef­forts of this ex-Bri­tish colony which is now ex­pe­ri­enc­ing a suc­cess­ful exit from its three-year Troika bailout pro­gramme. The Cyprus econ­omy is on the mend and reg­is­tered a sus­tain­able growth path and, as early as 2013, started of­fer­ing let­ters of nat­u­ral­iza­tion to for­eign­ers on con­di­tion that they hold a per­ma­nent pri­vate­ly­owned res­i­dence. Last month the Cypriot Coun­cil of Min­is­ters an­nounced the im­ple­men­ta­tion of an up­dated pro­ce­dure by re­duc­ing the fi­nan­cial cri­te­ria from €2.5 mil­lion to €2 mil­lion (a min­i­mum in­vest­ment of only €2 mil­lion is ac­cept­able pro­vided that the in­vest­ment is only made in res­i­den­tial prop­erty, of which one prop­erty must be worth not less than €500,000 and must be the in­vestor’s pri­vate res­i­dence).

Other eco­nomic cri­te­ria now in­clude: land for devel­op­ment, Al­ter­na­tive In­vest­ment Funds (AIFs) and fi­nan­cial as­sets (bonds/deben­tures) of Cypriot com­pa­nies. The amount that can be in­vested in Gov­ern­ment Bonds is now capped at €500,000 and the pre­vi­ous op­tion to in­vest in col­lec­tive in­vest­ment scheme is no longer avail­able. Cyprus does not claim any con­tri­bu­tion and the en­tire €2 mil­lion can be liq­ui­dated after three years. There­fore, the race is on to at­tract well-heeled ap­pli­cants in a num­ber of ju­ris­dic­tions. Th­ese are ac­tively com­pet­ing with us in a quest to at­tract such il­lu­sive in­vest­ment. It is com­mend­able that the gov­ern­ment has de­creed that 70 per cent of con­tri­bu­tions so col­lected are to be chan­nelled to the Na­tional Devel­op­ment and So­cial Fund and in the process, build a re­serve to but­tress fu­ture so­cial and eco­log­i­cal con­tin­gen­cies.

Alas, the race to sell our myth­i­cal souls con­tin­ues un­abated.

Newspapers in English

Newspapers from Malta

© PressReader. All rights reserved.