PM says no proof of irregularities so far, defends Malta’s taxation system
‘Transparency will be one of our competitive advantages more than ever’
In his first reaction since the Paradise Papers broke on Sunday, Prime Minister Joseph Muscat said the leak did not target countries like Malta, which adopts a system of a public register of companies.
On Sunday, the International Consortium of Investigative Journalists (ICIJ) released information on another massive leak of data, revealing the offshore activities of some of the world’s most powerful people and companies. The ICIJ, together with 95 media partners, investigated 13.4 million leaked files through a combination of leaked files from offshore service companies based in Bermuda and Singapore, as well as 19 company registries in some the world’s most secretive jurisdictions, including Malta.
The new leak shows Malta to be a popular destination for Azeri money and helps give an idea of the vast amounts of foreign business flowing through the island, The Times reported on Sunday.
In comments to The Malta Independent, the Prime Minister said: “So far, no proof of any illegal or irregular circumstances has emerged. Our system of taxation is in line with all European regulations and other international organisations such as the OECD.”
The Prime Minister added: “Speaking about the regulation of the industry, transparency and financial services should not be mutually exclusive. On the contrary, transparency in this industry has to become the name of the game.”
“Transparency in Malta’s financial services and company registration will be more than ever one of Malta’s competitive advantages,” Muscat said.
On Sunday evening, the International Consortium of Investigative Journalists (ICIJ) released information on another massive leak of data, revealing the offshore activities of some of the world’s most powerful people and companies.
The ICIJ, together with 95 media partners, investigated 13.4 million leaked files through a combination of leaked files from offshore service companies based in Bermuda and Singapore, as well as information from 19 company registries, including Malta’s.
Malta has not been classified as a non-cooperative jurisdiction, nor is it an ‘offshore jurisdiction’, having gained EU accession back in 2004 despite its tax imputation system effectively allowing foreign investors to pay five per cent corporate taxation on company profits. The island has, however, repeatedly come under fire for siphoning off taxable company profits from other EU member states by enticing foreign investors to register their companies in Malta and benefit from the giant tax rebate.
Malta’s company registry is available to the public but the database does not permit users to search by name for individuals linked to a company. The ICIJ reports that it will upload the leaked data to a searchable offshore company database on its website in the coming weeks. This should provide a clearer picture of how much foreign money flows through Malta, and the people behind this flow.
The files were obtained by the German newspaper Süddeutsche Zeitung, and shared with the ICIJ. A leading offshore corporate service firm by the name of Appleby suffered the data leak which allowed the ICIJ to investigate almost seven million loan agreements, financial statements, emails, trust deeds and other paperwork spanning some 50 years of company activity. Appleby is based in the financially secretive jurisdiction of Bermuda.
In addition, documents also come from a smaller familyowned trust company by the name of Asiaciti. Overall, the ICIJ reports that leaked records range from complicated, 100page corporate transaction sheets and “dollar-by-dollar payment ledgers to simple corporate registries of countries.”
“As a whole, the Paradise Papers files expose offshore holdings of political leaders and their financiers as well as household-name companies that slash taxes through transactions conducted in secret. Financial deals of billionaires and celebrities are also revealed in the documents,” the ICIJ reports.
Wealthy individuals often turn to financially secretive jurisdictions in order for their involvement in companies to remain hidden, as it is very difficult to trace the ownership thanks to laws put in place by several jurisdictions.
Having companies registered abroad or in offshore jurisdictions is legal, but it attracts money launderers, tax avoiders and evaders and other dodgy people due to the guaranteed secrecy. If a country does not know what wealth an individual holds overseas, it cannot very well demand that tax is paid on that wealth.
The Times of Malta reports that through the leak, Malta has shown to be “a popular destination for Azeri money.” Slain journalist Daphne Caruana Galizia, who was murdered on 16 October, had alleged that one of the daughters of the Azeri dictator, Leyla Aliyeva , had transferred “very large sums of money,” described as loan payments to Hearnville Inc, Tillgate Inc and Egrant Inc in 2016. The three companies named are registered in Panama, with the ultimate beneficial owners (UBOs) having been revealed, through the Panama Papers scandal, to be Tourism Minister Konrad Mizzi (Hearnville), the Prime Minister’s chief of staff Keith Schembri (Tillgate) and Nexia BT’s Brian Tonna (Egrant).
Caruana Galizia alleged that Egrant actually belonged to the Prime Minister’s wife, Michelle Muscat.
The Muscats vehemently denied the allegations, calling it the biggest lie in Malta’s political history, while a magisterial inquiry was launched to investigate the claims. Caruana Galizia’s allegations sparked an early election which took place on 4 June, resulting in a second landslide victory for Muscat’s Labour Party.
Big names linked with Malta
Overall, the ICIJ reports that over 120 politicians and world leaders have been implicated in the massive data leak. Some big names include Queen Elizabeth II, at least 13 allies, major donors and Cabinet members of US President Donald Trump and the chief fundraiser for Canadian President Justin Trudeau.
In total, nine politicians from around the world have been linked with companies or other holdings in Malta, with the most notable being the sons of Turkish Prime Minister Binali Yildirim.
An Indian member of parliament named Ravindra Kishore Sinha was found to be a minority shareholder and director of a security services company registered in Malta in 2008. Former Chancellor of Austria Alfred Gusenbauer was found to be one of the directors
and legal representatives of a company registered in Malta back in 2014. The former prime minister and president of Montenegro, Milo Djukanovic, was revealed to be a former shareholder of a company registered in Malta in 2012. A Ukrainian former member of parliament, Anton Prigodsky, is listed as the sole shareholder of a shipping company registered in Malta in 2013.
A Lithuanian member of the European Parliament named Antanas Guoga “owns a company called SG Holdings Ltd, according to the Maltese corporate registry. He did not reveal that stake in his parliamentary disclosures, according to 15min.lt, an online media platform in Lithuania,” according to the ICIJ’s Paradise Papers.
The Kazakh defence and aerospace industry minister is listed as having links to Malta; however, the ICIJ provided no further detail on such links. The sons of the Turkish prime minister, Erkam and Bulent Yildirim, were found to be linked with two companies registered in Malta.
“The Yildirim brothers are sole shareholders of two companies registered in Malta. The first, Hawke Bay Marine Co Ltd, was set up in April 2004. Public records suggest that the company owns or manages shipping vessels. The second, Black Eagle Marine Co Ltd, was incorporated in January 2007. Records show that Erkam, who was the majority shareholder of the companies, is also the director of both. The companies were listed as active in the Malta Registry of Companies in October 2017.”
The ICIJ reports that the former vice prime minister of Ukraine, Valeriy Voshchevsky, “is listed in Malta’s register of companies as one of only two shareholders and directors of Marfa Holding Ltd, along with Maltese citizen Marvic Borg. Marfa Holding was registered in Malta on 10 December 2013, and Voshchevsky is shown as having 1,080 shares and Borg as having 120. Voshchevsky doesn’t appear to have disclosed his interest in Marfa Holding when he took office, but it is not clear whether he was required to.
“There was also some controversy over whether he had Maltese citizenship after the issue was raised by a member of Ukraine’s parliament. Voshchevsky denied being a Maltese citizen. The company showed up as “in dissolution” in the Malta Registry of Companies in October 2017.”