Author: George Mangion
Published on The Malta Independent 10 January 2021

So far transfer pricing (TP) rules are not in force locally even though we know that about sixty other countries use it.  There is an indirect reference to transfer pricing in the concept of “arms-length principle” (ALP).  In particular, we find that Article 5(6) of the Income Tax Management Act provides that if a non-resident person carries on business with a resident person, and due to their special relationship, the transaction does not produce arm’s length profits for the resident person, then taxation will be imposed on the ordinary profits that would be expected to arise from the business.

Also, Articles 2 and 12(1)(u)(2) of the Income Tax Act provide for arm’s length provisions in relation to the permanent establishments.  In the absence of legislation underpinning the application and interpretation of the ALP, in a possible situation where a cross-border transaction is not in accordance to the ALP, the determination of the ALP will refer to various sources of international law implying the use of the TP. In such a scenario, Malta will apply TP, due to the international obligation raised from the conclusion of the relevant Article in its treaties.

Needless to say, we are not completely shielded from this rule because of Article 5(6) of the ITMA referred to earlier.  This gives the discretion to the Commissioner to determine the transfer price following the OECD guidelines. One finds reference to transfer pricing (TP) in the published Patent Box Regime (Deduction) Rules, 2019.

Here, there is a specific reference made to the fact that the determination of income or gains shall be made on the basis of a transfer pricing method in terms of OECD’s Transfer Pricing Guidelines. Bearing this, taxpayers have so far been spared the complexity of transfer pricing exercises even though there are embedded in the law, general anti-avoidance provisions and brief references to transactions at arm’s length.

There is an unwritten rule that regulates transactions between residents and non-residents which as stated earlier must adhere to the arm’s-length principle. This means that prices quoted between parties ought to reflect the commercial rates usually charged by non-related parties.  Having said that, so far there are no fixed rules to establish how such prices can be determined. In this regard, the law provides that for the purposes of calculating the tax liability of a taxpayer, an arrangement or a series of arrangements can be ignored where it has been put into place for the main purpose or one of the main purposes of obtaining a tax advantage that defeats the object or purpose of the applicable tax law.

One needs to assess whether prices are genuine having regard to all relevant facts and circumstances.  The spirit of the law that regulates transfer pricing under OECD rules is therefore somewhat mimicked in our legislation. Effectively, it argues that any arrangement can be regarded as non-genuine to the extent that it is not put into place for valid commercial reasons that reflect economic reality.

In addition, it can be argued that Malta has indirectly introduced TP rules by adhering to international conventions and relevant EU directives and in particular in the following considering that Malta’s double tax treaties use the OECD Model Tax Convention.  Therefore, Article 9 “Associated Enterprises” of the OECD Model Tax Convention is included in Malta’s double tax treaties.

This Article provides that any transactions between associated enterprises that are not at arm’s length shall be adjusted for tax purposes in accordance with the ALP.  Reading of the Commentary of OECD this refers to the application of the ALP through the OECD TP Guidelines.  Further, the majority of the countries following the ALP use as means of application and interpretation of ALP, the provisions of the OECD TP Guidelines.  Moving on to other related rules, let us give some background on the journey that took us to adopt ATAD.  It was on 12 July 2016, that the Council of the EU unanimously adopted the Council Directive.

Later, Malta transposed ATAD 2 which builds on the provisions of ATAD 1.  Another important rule requires Malta to apply the arm’s length principle in cross-border transfer pricing issues. This can be found in the Associated Enterprises Article of the OECD Model Tax Convention, which Malta accepted in its double taxation treaties.  One may venture to comment on how indirectly transfer pricing rules creep in our legislation.

A typical case is the right of a country that is a party to a tax treaty to adjust the taxable profits arising from transactions between related parties and binds the other country to make corresponding adjustments to avoid double taxation.  Here comes the rub.  Such adjustments must be made on the basis of the arm’s length principle that again refers us back to the OECD standard. The latter regulates how transfer prices for tax purposes can be computed.  As can be imagined, in similar circumstances there may arise disputes in the interpretation of how such prices are determined.

In such instances, OECD rules allow for disputes to be referred to arbitration.  This follows in terms of the EU Arbitration Convention, of which Malta is a party.  Another remedy is provided by the Directive on Dispute Resolution Mechanism – this was transposed to Maltese law this year.  As can be expected, Malta has so far not been subjected to such dispute resolution since transfer pricing rules are not applicable.  For most member states, such disputes can be common and arise when exercises are carried by respective countries to ascertain the arms-length – ie the true commercial price.

In practice, this means that to prevent double taxation, a primary (upward) adjustment by one tax administration should be followed by a corresponding (downward) adjustment by the other.  Needless to say, no administration takes lightly to a reduction of its tax base. This said it is clear that in the field of transfer pricing, a sincere form of collaboration is paramount.

Therefore, it would be expedient to recognise that it is in everyone’s interest to avoid double taxation and double non-taxation hence the reason to invoke the arm’s length principle.  To assist in reaching consensus, OECD highly recommends for parties to agree to a joint audit. The findings of such an audit should be incorporated in a concluding report.

To the extent possible, tax administrations should endeavour to arrive at a common interpretation of how the arm’s length principle applies to the findings of a specific audit based on a scientific analysis of all the facts and circumstances.  Such an agreed outcome would give an undertaking that the audit does not result in double taxation.  Only thus, can tax authorities reach a common understanding of how a true and fair arm’s length exercise works?

In conclusion, one may relax that the full burden of transfer pricing rules is not yet activated in Malta.  How such rules will affect Malta and its financial sector in the future is too early to assess.  What is important is that practitioners avoid taking an ostrich head-in-sand attitude.  There is nothing to halt the introduction of an all-embracing transfer pricing rule which will be applicable to local companies as duly recommended by OECD.  In this respect, businesses should start evaluating the effect of the possible imposition of TP rules on their intragroup transactions and manage any associated risks.

 

Author: George Mangion
Published on The Malta Independent 10 January 2021
Get in touch: info@pkfmalta.com

 

Author: George Mangion
Published on Business Today 7 January 2021

Few entrepreneurs can ever forget the grave consequences of the insolvency of Priceclub in 2001. This was a major shopping complex operating in Malta enjoying an overwhelming share of the domestic market for foodstuff trade with a reported €35 million turnover.

Its financial tragedy was marred by stories in the media of an undercapitalised group of companies which albeit profitable, was grossly over-trading. No proper stock-taking functions were discovered to be in place after PWC was appointed by unpaid creditors to investigate the transactions and unravel any wrongful trading practice. The brief also included inspecting records to check on the reporting obligations of the group.

PWC found inter alia that poor inventory controls were rife, while millions were siphoned by directors to finance side property deals. The business disruption of such a major group left hundreds of unpaid creditors, many discharged workers and the initiation of court cases by suppliers that went penniless. Court cases took 20 years and cost a lot leaving dissatisfied suppliers chasing for redress against allegations of wrongful trading by the directors and the quality of reporting by the auditors.

The auditors, Deloitte, have since been ordered by the court to pay nearly €42,000 to former Priceclub suppliers Valle Del Miele (VDM) after losing an appeal it had filed against a judgment which had found it to have been negligent. Luckily, there has been thus far no-repeat incidences of the Priceclub collapse since 2001 but other insolvencies have occurred which did not make the headlines but with caused much damage to the economy.

This resilience is perhaps due to a diversification of the consumer market sector into well-organised shopping malls which compete for trade offering competitive prices and efficient service. Yet the Maltese economy does not appear to be immune to insolvencies, more so now that COVID-19 is causing vulnerabilities to come to light even though many governments have gone in debt to try and salvage certain sectors devastated by lockdowns. A quick return to normality was promised by many governments, which initially believed the pandemic would only last a few months. In reality, with the stronger second wave of the pandemic, commerce took a nose dive.

In Malta, statistics show how almost one half of the working population (barring state employees) are barely surviving on a tapered furlough scheme, now extended till March. The consequences of this financial and commercial tragedy will be felt this year as a number of businesses will start closing down. It is not unrealistic to expect an unprecedented wave of insolvencies and bankruptcies as creditors resolve to eat out of past reserves peters out. Though this may sound a diluvian prediction yet one needs to act in a pragmatic manner to avoid another Priceclub debacle.

Just tinkering with book losses and deferring debt write-offs will not lead to a sustainable recovery. Much delayed insolvency reforms led to conflict-of-laws issues, particularly regarding judicial recognition and enforcement in case of foreign insolvency in cross-border proceedings. Whilst other jurisdictions have updated their insolvency laws following the 2008 financial crisis, Malta has not followed suit.

A solution is now in hand as an EU business recovery directive must be transposed by July this year. This refers to the directive (EU) 2019/1023 of the European Parliament and of the Council of 20 June 2019. It concerns preventive restructuring frameworks, on the discharge of debt and disqualifications, and on measures to increase the efficiency of procedures concerning restructuring, insolvency and discharge of debt.

An early warning system has to be put in place to alert debtors that insolvency may be creeping in. The law suggests that three important indicators such as:-

(a) alert mechanisms when the debtor has not made certain types of payments;
(b) advisory services provided by public or private organisations.
(c) incentives under national law for third parties with relevant information about the debtor, such as accountants, tax and social security authorities, to flag to the debtor a negative development.

Locally, the Official Receiver (within MBR) with help from Deloitte, is charged with the Maltese transposition of Directive (EU) 2019/1023. As stated earlier, once in place, the law focuses on preventive restructuring frameworks, on the discharge of debt and disqualifications, and on measures to increase the efficiency of procedures concerning restructuring, insolvency and discharge of debt. When fully transposed this directive is expected to prevent non-detection of the build-up of non-performing loans. The availability of effective preventive restructuring frameworks prescribed by MBR would ensure that action is taken before enterprises default on their loans.

Restructuring should enable debtors in financial difficulties to continue the business, in whole or in part, by changing the composition, conditions or structure of their assets and their liabilities or any other part of their capital structure – including by sales of assets or parts of the business or, where so provided the business as a whole – as well as by carrying out operational changes.

Preventive restructuring frameworks should, above all, enable debtors to restructure effectively at an early stage and to avoid insolvency, thus limiting the unnecessary liquidation of viable enterprises. Such frameworks should help to prevent future job losses and the loss of know-how and skills, and maximise the total value to creditors – in comparison to what they would receive in the event of the liquidation of the enterprise’s assets or in the event of the next-best-alternative scenario in the absence of such a plan.

Locally, SME’s in particular do not have the resources needed to assess risks and install early preventive measures unless such systems are made available to them by MBR. Ideally, MBR with a new Blockchain monitoring system helps to remove any barriers to the effective preventive restructuring of viable debtors in financial difficulties.

Essentially, this contributes to minimising job losses. It can prevent losses of value for creditors in the supply chain, preserves know-how and skills and hence benefits the wider economy. Facilitating a discharge of debt for entrepreneurs would help to avoid the exclusion of workers from the labour market and enable them to restart entrepreneurial activities.

This is an essential tool which post-Covid helps attract foreign direct investors which are assured that their investment in Malta is protected from the ravages of aggressive creditors or other class actions.

 

Author: George Mangion
Published on Business Today 7 January 2021
Get in touch: info@pkfmalta.com

 

 

Author: Dr Samuel Sciberras – Junior Legal Associate, PKF Malta
Updated on 4th January 2021

Act V of 2020 defines ‘cell company’ as a company formed/constituted as such or, converted into a cell company, and creating within itself one or more cells to segregate and protect the cellular assets of the company. Companies with this structure may be either;

(a) formed/constituted as a cell company to carry on shipping/aviation business as defined in Article 84E of the Companies Act’ or else

(b) a company carrying on such business may be converted into a cell company, provided that it is authorised to do so by its Memorandum and Articles of Association.

Cell companies are distinguished from other companies by their name, which needs to have the words ‘Mobile Assets Protected Cell Company’ or ‘MAPCC’.

The concept of the Cell Company is not in itself a new addition in the Maltese legal framework as it has already been put into practice in the insurance sector, but it is the first time being available to shipping and aviation. Foreign jurisdictions have for a long time introduced in their legislative framework concepts of Incorporated Segregated Account Companies or Segregated Portfolio Companies, by which each segregated account has a separate legal personality, allowing single legal corporate entities to benefit from the segregation of assets and liabilities. Trusts have also been employed to attempt and achieve the same results but as trusts aren’t recognized in all jurisdiction, problems have been encountered.

Both shipping and aviation are heavily characterized by the need to legally segregate each asset within the patrimony of the owner. Thus, compartmentalization of all assets in separate units is already an accepted practice in the industry. In fact, it is not rare for a company involved in either the shipping or aviation business to only own a sole aircraft or ship. A fleet of ships would have several companies, all needing to be managed and controlled. This can be costly and time-consuming.

A cell company provides the possibility to have the complete ownership, operation (under charter, lease or otherwise), administration and management (including personnel engagement, employment or management whether on board or otherwise) of any ship or of any aircraft or aircraft engine and the carrying on of all ancillary financial, security, commercial and other activities in connection therewith.

The application of cell companies in respect to the shipping and aviation industry is all possible through the introduction of Legal Notice 248 of 2020 (SL 386.22) Companies Act (Shipping and Aviation Cell Companies) Regulations 2020 which came into effect on 16^th June 2020. This amendment permits the use of the new structure for companies operating in the shipping and aviation sector, mirroring the model employed in insurance where company assets are ring-fenced via the creation of cells.

A cell company must also have all the usual documentation required for a normal company, such as an M&A, a copy of the resolution allowing for amendment of such M&A, and payment fees for each cell are also required. The M&A of the cell company must declare that it is a cell company.

The Business Registry is vested with the prerogative of approving the incorporation of a cell company after such company has each cell allocated with its own name or designation.

All cell companies must comply with the Companies Act (Register of Beneficial Owners) Regulations, which also automatically apply to cell companies and their cells.

The creation of a cell by a cell company does not create, in respect of that cell, a legal person separates from the company. A cell does not benefit from separate legal personality but it is a single legal person.

A company can be created as a cell company from the start or be converted into one. If a company is converted into a cell company in terms of these regulations, the company shall, within 40 days from the day of its conversion into a cell company, by resolution of its directors’ attribute assets of the company to a particular cell of the company. The company shall, within 14 days from such resolution, deliver a notice to the Registrar of the MBR (Malta Business Registry) specifying the subject of the resolution and outlining the specific description of every asset being attributed to a particular cell. Upon publication of such notice, such assets shall be considered to be cellular assets of a particular cell.

The possibility of those engaged in the shipping or aviation business to set up a cell company provides for segregating and protecting the cellular assets of the company including segregated accounts, compartments or units. Segregation of assets needs proper segregation structures depending on the needs of the parties and the type of transaction carried out and the type of assets involved. Apart from this, segregation of assets signifies segregation of claims and liabilities attached to the asset.

As such, MAPCC is burdened with a host of requirements which naturally ought to be adhered to. One of which is the obligation of having directors able to establish a visible, constant, and discernible discrepancy between assets appertaining to a cell company vs non-cellular assets. In order to perform this obligation, directors are strictly required to keep and maintain separate records, accounts, statements, and other ancillary documents which may be deemed essential in order to preserve a tangible division between the assets and liabilities of every MAPCC cell, whilst also keeping a distinction between the MAPCC’s non-cellular assets.

Similar to the situation vis-à-vis agents of mandates (mandatories), a cell company is obliged to make third parties aware who the aforementioned company is entering discussions with that such an individual is trading with a cell company. Such information must also be provided to all persons entering a transaction with the cell company itself, including in all business letters and forms. Such information must also include the purposes of that transaction, identify or specify the cell in respect of which that person is transacting unless that transaction is not a transaction in respect of a particular cell.

Without doubt, in cases of the transaction with specific cells, there must always be clarification regarding which specific cell each transaction is attributable.

The ‘Cell’ is the entity created by a cell company for the purpose of segregating and protecting the cellular assets of the company and may include references to segregated accounts, compartments or units within a company having multiple accounts, compartments or units, by whatever name designated.

The Cell Company can have both Cellular Assets and Non-Cellular Assets. Cellular Assets of a cell company comprise the assets of the cell company attributable to the assets of that cell company, comprising of the assets represents by the proceeds of cell share capital and reserves attributable to the cell, and all other assets attributable to the cell. Non-Cellular Assets of a cell company comprise the assets of the cell company which are not cellular assets.

A MAPCC may issue shares in relation to any of its cells whereby such cell shares constitute cell share capital. Proceeds of such shares constitute are Cell Share Capital, which comprises cellular assets attributable to the issuing cells. Having said that, it goes without saying that a MAPCC is able to issue cellular dividends in virtue of cellular assets and liabilities or profits deriving from a specific cell. It is essential that even when issuing a dividend, each cell has to be kept distinct from another, in the sense that when assessing whether dividends can be distributed or not, the accounts of the other distinct cells need to be kept separate, hence, the financial position of one singular cell cannot compromise the decision of issuing dividends vis-à-vis another cell.

The same thing can be said in respect of the MAPCC’s non-cellular assets. Once again, this distinction must be kept when incurring additional liabilities. When a particular cell incurs liability, such cell ought to make good for such liabilities through its own assets, and cannot resort to the assets of other cell companies. Naturally, this also applies in a creditor scenario, in the sense that a creditor may not attack the assets of other cells but only that of the cell which is indebted to the creditor.

Cellular assets of any cell of a cell company (but not non-cellular assets of a cell-company) can be transferred to a person, natural or legal, cell company or not. The transfer will not entitle creditors of such company to have recourse on other assets of the person to whom cellular assets were transferred. A cell company can make payments or transfers from cellular assets attributable to any cell to a person entitled to have recourse to those same assets.

If an asset is attributed to a specific cell, the interest of an owner in a registered ship or aircraft must be duly notified in relation to any registered mortgage or security interest held. Such attribution will not prejudice any rights of any creditor of the company existing prior to the conversion to a cell company or that of registered mortgage or security interest.

Following the attribution of a particular asset to a cell of a cell company, the interest of an owner in a registered aircraft or ship in terms of the Merchant Shipping Act, the Aircraft Registration Act or any other law or regulation as the case may be, shall be noted accordingly, as long as any registered mortgagee or registered security interest holder has provided its consent in this regard. Such attribution shall not prejudice any rights of any creditor of the company existing prior to the conversion to a cell company; or that of a registered mortgagee or registered security interest holder in relation to any registered mortgage or any security interest in terms of any applicable law or regulation.

Cellular assets attributable to a cell of a cell company are only available to the creditors of the cell company who are creditors in respect of that cell and who are thereby entitled, pursuant to these regulations, to only have recourse to the cellular assets attributable to that cell;

Cellular assets are absolutely protected from the creditors of the cell company who are not creditors in respect of that cell and who accordingly are not entitled to have recourse to the cellular assets attributable to that cell.

Any liability not attributable to a particular cell of a cell company shall be the liability solely of the company’s non-cellular assets. In the event of an executive warrant being issued or enforced on any cellular assets attributable to a cell of a cell company in respect of liability not attributable to that cell, and in so far as such assets or compensation in respect thereof cannot otherwise be restored to the cell affected, the cell company shall:

(a) cause or procure its auditor, acting as an expert and not an arbitrator, to certify the value of the assets lost by the cell affected; and

(b) transfer or pay to the cell affected, from the cellular or non-cellular assets to which the liability was attributable, assets or sums sufficient to restore to the cell affected the value of the assets lost.

It shall be lawful for the cellular assets attributable to any cell of a cell company (but not the non-cellular assets of a cell company) to be transferred to another person, wherever resident or incorporated, and whether or not a cell company.

A transfer of cellular assets attributable to a cell of a cell company shall not of itself entitle creditors of that company to have recourse to the other assets of the person to whom the cellular assets were transferred.

At first glance, it may seem that the fact that each cell ought to be distinguished from another is a disadvantage for a MAPCC but upon closer examination, this facility is the most advantageous aspect of cell companies. Since each cell has its own patrimony and thus distinct from the parent or core cell company and other cells alike, so it is possible for the seclusion of each cell as well as the structuring of every individual cell.

Hence, the source and assets of each cell are protected intrinsically having the guarantee that neither the core company nor other cells may exploit the former cell’s assets. The process of cell incorporation is not laborious, hence allowing for a rapid and effortless procedure allowing a newly incorporated cell to start its operations quickly. Segregating the affairs of one cell will not hinder those of other cells since each cell has in place a board of directors as well as a customized memorandum and articles of association.

The main benefit of cell companies is that assets and liabilities for each cell constitute a distinct patrimony for that cell and are segregated from the core cell company and other cells.

Once again, the fact that each cell is distinct from another is beneficial to other cells because the dissolution or insolvency of a particular cell does not conjure a parallel outcome in respect of other cells or the core company.

Moreover, in the case of wanting to dissolve a cell company, it can be done with ease and is in fact much easier to close down a cell than it is to close down a conventional company. One of the most beneficial outcomes of a cell is the fact that cell companies in Malta are subjected to an advantageous tax imputation system.

Liquidation proceedings for a cell company will respect the statutes of each cell as a separate patrimony. Without doubt, liquidations under the Companies Act apply automatically to a cell as if it was a distinct legal entity operating under the Companies Act, even with the modifications as necessary to cater to the fact that the cell is not a company or a distinct legal entity.

Some of the disadvantages of cell companies could be that foreign jurisdictions may not allow such structures and may not recognize them under their law. Apart from this, even if the general rule is that assets of a cell should satisfy its liabilities, there is a risk that a creditor and court mistakenly or intentionally fail to comply with such a rule. However, there are remedies available in case this rule is not adhered to.

One of the most beneficial outcomes of a cell is the fact that cell companies in Malta are subjected to an advantageous tax imputation system. For assistance please email our tax department at PKF Malta on info@pkfmalta.com.

Author: Dr Samuel Sciberras – Junior Legal Associate, PKF Malta
Updated on 4th January 2021
Get in touch: info@pkfmalta.com

Author: George Mangion
Published on The Malta Independent 3 January 2021

This is a fantasy trip, which takes us on a time machine travelling to New Year’s Eve in 2050. Our economy has trebled during these 30 years having discovered gas in offshore waters and started exporting it to Europe via two gas underwater pipes.

Our GDP has reached and exceeded that of Luxembourg even though our hospitality and gaming sectors have waned but the export of medicinal cannabis has flourished. Over the years, many traditional attributes, which endeared our lifestyle as a young nation, have morphed into a unique ecosystem that appreciates the value of time use and meaning of life. Our cities and villages have seen a metamorphism which saw alternative building materials replace the use of the hitherto honey-coloured indigenous stone.

Writing this article on New Year’s Eve year 2050, I try to understand how the platform of affluence, gained by the islanders, partially resulted in a change away from cheap labour to large-scale replacement by automation resulting from the heavy investment in R&D which boosted the academic levels of our four international universities and technical colleges.

These knowledge factories attract talent and deliver innovation. Changes in demographics over the past 30 years has led the community to achieve a higher standard of wellbeing, as less work leads to increased leisure time and flexibility overtime use.

Our national leaders have been wise to make full use of automation thus reducing production cost and increase efficiency in exports. This strategy was selected after various protests by social groups that pushed politicians to remove discrimination in the sharing of benefits. In theory it means that the rich no more add to their bounty and the poor sink deeper into the poverty hole. The basic pay is automatically increased by 5% to 10% annually while production targets are leveraged upwards. Advancement in free education has been reached due to students achieving higher grades in science, AI and maths subjects.

But it is not a rose garden – a sad situation reflects our lethargy in combating climate change which in the Mediterranean has seen sea levels rise prodigiously. Due to lack of co-ordination of Med. countries to reduce carbon footprint, we have suffered from savage storms, high winds and the onset of drought in the summer months. Had it not been to our later-day investment in clean energy (which was a bit too little too late – delayed up to 2025), the island endured flooding due to rising sea levels. Homes in Sliema, Marsa, Cottonera and Msida suffered acute flooding.

Again, nobody anticipated the extent of disease outbreaks or the resulting death toll. Diseases once considered restricted to developing countries reached plague levels in Europe due to lack of commitment to pool research in vaccines by the power blocks of Europe, Asia and the USA. Thanks to a change in the mindset that saw an epiphany in 2030, the island finally invested heavily in alternative clean energy sources and exploited its abundance of natural gas in offshore waters; most of which is exported to Sicily for conversion into LNG. This source of income has filled our state coffers like never before and the government made sure that an independent posterity fund was created to balance for any future calamities.

Travellers arriving on the time machine observe that there is no need for back-breaking chores in raking the garden or painting the rooms as such chores are relegated to robots. Of course, not all can afford to take advantage of friendly robots for tasks such as cleaning, cooking and organising. Some of this technology is so prevalent that functional robotics (fifth generation) can recognise human speech and respond to it to perform specific tasks around the house. Many make use of family cars with hydrogen-powered hovercraft mechanisms which float effortlessly over sea and land with zero emissions.

Smartphone apps that interact with one’s home are commonplace and kids can handle the grocery list and book its delivery by a drone. The internet of things is now passé, as busy housewives can remotely check the contents of the refrigerator, turn on the oven or start the dishwasher. Most houses have indoor gardens which use hydroponic containers powered by LED lighting instead of sunlight to grow plants such as tomatoes, potatoes, leeks, onions, carrots, garlic and beetroot. Commercial farming has been reduced to a hobby activity.

Moreover, homes of the well-to-do have walls endowed with nanotechnology that can project outside views or real-time scenery from the beaches, giving the inhabitants a holistic feel-good experience. Walls display movies, collateral information, environmental information, data about public transportation and weather schedules.

They will not only provide information and entertainment but will also enhance homes into a dynamic atmosphere by lighting scenarios matching the time of day, the mood of the user and their health conditions. Homes can now generate a good part of their energy needs. Nevertheless, in 2050 there are still pockets of the workforce who cannot afford to buy all technological advancements. Thanks to advances in science, one can enjoy an extravaganza of home entertainment systems which combine augmented reality, virtual reality with mediated reality movies and no cable television.

For the high-heeled, they enjoy interactive home entertainment systems that intensify end of year fun making it more attractive and sensual than ever before. Guess how many can afford a space tourism treat for the dark side of the moon?

It goes without saying that science can improve longevity, such that with improved health care and better welfare benefits, one is expected to live longer. With such increases in life expectancy and the prospect of a larger number of older people at home, it takes a careful approach on how to plan our leisure time.

In conclusion, can one contemplate taking a trip on a time travel machine which will take us to 2050, instantly relieving us of the melodrama of Covid-19 human tragedy with millions dead and the global economy on the verge of a depression?

A back to the future trip to 2050 will see the islanders exploiting natural fossil fuel resources, drive cars using hydrogen-powered hovercraft that navigate over land and sea. In this future scenario, regretfully we still carry a number of skeletons in our closet such as corruption, racism, job discrimination, the plundering of national assets for the benefit of the privileged, widespread cronyism and nepotism.

It appears that the human race has not learned much from mistakes of the past as we still must pay for our sins of omission.

 

Author: George Mangion
Published on The Malta Independent 3 January 2021
Get in touch: info@pkfmalta.com

 

Author: George Mangion
Published on The Malta Independent 27 December 2020

This is a fantasy trip which magically flies us to New Year’s eve in 2050.  Upon arrival, we wonder how times have changed on our tiny archipelago.

Luckily, the economy has trebled during these thirty years having discovered gas in offshore waters and started exporting it to Europe via two gas underwater pipes. Our GDP has reached and exceeded that of Singapore, even though our pharma companies and gaming sectors have waned and only a small proportion of the largest gaming stalwarts remained using our fiscal advantages since games have now become personalized due to the amazing speed of 10G bandwidth.

To the traveller’s surprise, one observes how during the lapse of 30 years, past traditional attributes which endeared our lifestyle have morphed into an inimitable ecosystem – one that appreciates fully the value of time use and meaning of life.

Our cities and villages have seen a metamorphism which saw tighter control over exploitation of ODZ land and a complete ban from the use of the honey-coloured stone for building.  Writing this article on New Year’s Eve in 2050, I ventured to ask about progress in the working conditions of low-income workers.  My satisfaction came to me as a pleasant notion that tangible affluence was manifest by the islanders due to the change from cheap labour policy.

Again, I discovered that more investment in R&D reaching 3% of GDP has helped increase the sophistication of our educational facilities.  Without bragging, one can now boast that our four international universities and technical colleges compete with Harvard and MIT in the USA.  These knowledge factories attract talent.  Changes in demographics have led the community to achieve a higher standard of wellbeing, less work leads to increased leisure time and flexibility over time use.

There is a shift away from corporate employment towards family businesses, from multi-national brands towards local producers, and from large manufacturers towards local 3D printing, given that workers can use their creativity to work in small clusters.

I visited a look-alike Silicon valley in Ta Qali, which housed many start-ups and was proud of two international Unicorns.  As can be expected in 2050, our national leaders have yielded to pressure from social groups pushing them to remove discrimination in the beneficiaries that ought to equally share benefits from the trickle-down economy.

It means that in theory, no more the rich add to their bounty and the poor sink into the poverty hole.  One example in use is the successful experiment in allocating a basic income level for everyone in society.  This is a different concept away from the old C.O.L.A mechanism and takes a more representative sample of everyday expenses.

The basic pay is automatically increased by 5% to 10% annually while production targets are leveraged upwards.  Surely, fellow time travellers who have just landed in 2050, notice a level of tranquillity given that society has matured to enjoy an alternative identity beyond work. Now, public education is focused on achieving higher grades in science, innovation and maths subjects.  But it is not a rose garden – a sad situation reflects our lethargy in combatting climate change which in the Mediterranean has seen sea levels rise prodigiously with extensive damage to homes in Cottonera, Sliema, Msida and Marsa.

Moving on in our travel schedule, islanders told us how in 2030, the island invested heavily in alternative clean energy sources and exploited its abundance of offshore natural gas-all thanks to heavy investment by foreign investors.  Most of the natural gas is exported to Sicily for conversion into LNG.  This source of income has filled our state coffers like never before and the government made sure that an independent posterity fund is created to account against any future calamities.

Tales of corruption over abuse of state funds misallocated from gas sales were skirted away not to upset the vision of travellers.  Instead, kudos were showered on the merits of state-of-the-art technology.  Friendly robots work all day with house chores such as cleaning, cooking and organizing.  Functional algorithms in robots (fifth generation) can recognize human speech and respond to it or do specific tasks around the house.

Smart phone apps that interact with one’s home are commonplace and kids can handle the grocery list and book its delivery by drone.  Busy housewives can remotely check the temperature of the refrigerator, turn on the oven, or start the dishwasher.

Most houses have indoor gardens which use hydroponic containers powered by LED lighting instead of sunlight to grow plants such as tomatoes, potatoes, leeks, onions, garlic and beetroot.

Moreover, homes of the well-to-do have walls endowed with nanotechnology that can project outside views or a real-time scenery from the beach or live sport events giving the inhabitants a holistic feel-good experience.

Walls display movies, collateral information, environmental information, data about public transportation and weather schedules.  They will empower homes into a dynamic atmosphere by lighting scenarios matching to the time of day, the mood of the user, their health conditions. Travel by autonomous vehicles take away the hassle of parking while most families can afford hydrogen powered SUV’s.

Gone are the days when blackouts are blamed by the state utility on occasional cable outages linking us to Sicily.  Homes can now generate a good part of their energy needs and power themselves independently of the state utility. Nevertheless, sadly in 2050, there are still pockets of the workforce who cannot afford to buy all technological advancements.

I was amazed at the extravaganza of home entertainment systems.  These combine augmented reality, virtual reality with mediated reality movies and voice-controlled television.  On one occasion, I was shaking hands with a virtual Elvis Presley singing Mama Likes the Roses.  Eager to notice, how the high heeled in Madliena, enjoy interactive home entertainment systems that intensify convivial fun, making it more sensual than ever before.  At such a residence, I was invited to book for a trip to planet Mars as the waiting list for travellers was getting longer by the hour.  As can be expected, a gem of living in 2050, includes longevity as a result of improved healthcare and better welfare benefits. With increases in life expectancy and the prospect of a larger number of older people, this requires a careful approach how to plan our leisure time.

Social exclusion can be deadly in such an environment.  In conclusion, the visionary trip may be an eyeopener to many readers impressed with a high standard of living yet Malta still suffers from sporadic diseases and natural disasters due to climate change.  Again, its closet harbours other demons such as state corruption, plundering of national assets for the benefit of the Illuminati, poor governance and rife cronyism among party apologists.

My final question – are you still keen to take a ride on the time machine?

A prosperous New Year to all.

 

Author: George Mangion
Published on The Malta Independent 27 December 2020
Get in touch: info@pkfmalta.com

 

 

Author: George Mangion
Published on Business Today 17 December 2020

2020 is fast coming to its end. It started well for the first two months and we all enjoyed the brisk air and savoured memories of office parties and driving to our favourite restaurants with family and friends.

This came to an abrupt halt in mid-March, when the health authorities gave us a severe shock of a three-month complete lockdown. Prior to the lockdown, we saw scenes of shoppers madly buying anything that came useful, sweeping clean shelves of pasta, sugar, crackers, baking materials and toilet rolls – all by the dozen. Shelves in many stores were laid bare and soon cars were driven out of garages to make space for emergency stocks.

Nine months on and we were regaled with daily TV appearances of medical officers announcing the increasing number of victims and mortality numbers (mostly vulnerable persons). Now, in the holy month of December, there is little feeling to mingling together in staff parties (which are banned) or visiting clubs, gyms, cinemas and other places where social distancing rules cannot be upheld.

Many have an urge for the past glory of Christmas which was a time for exchanging heartfelt wishes to their neighbours and staff members. Deep in our subconscious, we still clamour for the good times when Christmas was a time of giving and sharing with those around us. And that sharing is not limited to those that we love and care for, it is also for those we have never met and will never meet (as is evident during the Strina fundraiser each year)

Now, no more seasonal cheer from meeting extended families for fear of contracting COVID-19. While family traditions carry a special significance for many Maltese, we need to limit ourselves to basic activities that are necessary to keep the family unit functioning.

For now, we can no longer risk the occasional family dinner on Friday night at a favourite restaurant where family members and friends share jokes and relax. Such simple gatherings generate fond memories that everyone cherishes. We hold fond memories of traditional habits such as going to hear Mass after the family dinner on Christmas Eve.

Few this year will hear the sermon of the child (Il-Priedka tat-Tifel), which dates back to 1883, is the oldest and one of the most important traditions at Christmas. The sermon is, unusually, not given by the priest but by a small boy or girl aged between 7 and 10, who tells the story of nativity whilst standing at the main altar.

In the mid-1980s in every town, after the Midnight Mass, children’s processions were organised. Hot chocolate drinks laced with a touch of brandy greet the adults after the midnight vigil. Again, this year many will not bother to indulge baking the traditional Christmas log, made with lots of chocolate, cherries, nuts, biscuits and a bit of whisky – face masks and social distancing dictate caution.

On a good note, a publication by a government department responsible for poverty reduction and social exclusion reported hefty progress. It warms our heart to hear that there has been a decrease in the rate of severe material deprivation, referring to situations when a person struggles to pay for at least four of nine basic items and can’t cope with unexpected expenses.

To give an example, in 2013 7.1 per cent of pensioners were in this bracket. Since then, the number has decreased significantly to 2.6 per cent. Simply put, the proportion of people at risk of poverty has dropped from 24.6 per cent in 2013 to 20.1 per cent last year. Even better is that the number of children at risk of poverty or social exclusion has also decreased; from 33 per cent in 2013 to 23.6 per cent in 2019.

That was a result of the major change in demographics during the past seven years as more liberal laws were introduced to have a more inclusive yet diverse society. Now, we have more families with single parents, families headed by two unmarried partners, either of the opposite sex or the same sex, households that include one or more family members from a generation; adoptive families; foster families; and families where children are raised by their grandparents or other relatives.

We moved from big, interconnected, and extended families, which in the mid-1970s helped protect the most vulnerable people in society from the shocks of life to smaller, detached nuclear families (a married couple and their children or the new combinations listed earlier).

Now this pandemic has led us to restrict the family group to the bare minimum so as to protect ourselves from infection. This has automatically given birth to the nuclear family structure. It is an intense unique set of relationships among, say, four people. If one relationship breaks down, there are no shock absorbers. In a nuclear family, the end of the marriage means the end of the family as it was previously understood.

But while extended families have strengths, they can also be exhausting and stifling. They allow little privacy; you are forced to be in daily intimate contact with people you didn’t choose. There’s more stability but less mobility. Family bonds are thicker, but the individual choice is diminished. You have less space to make your own way in life.

The pandemic is the Grinch that stole our traditional Christmas traditions. In the COVID scenario, during lockdown mothers spent a lot of time trapped inside their home raising their children and overseeing their online schooling.

COVID, the Grinch, forced us to live through the most rapid change in the family’s structure. The causes are economic, cultural, and institutional all at once. In conclusion, this year has extenuated the focus on the digital age where people growing up in a nuclear family tend to have a more individualistic mindset, galvanised by the dictates of social media. People with this mindset tend to be less willing to sacrifice themselves for the sake of the family, and the result can be more family disruption.

A merry Christmas to all.

 

Author: George Mangion
Published on Business Today 17 December 2020
Get in touch: info@pkfmalta.com

 

Author: George Mangion
Published on The Malta Independent 15 December 2020

Global regulators particularly those in Europe feared that Libra, at least in theory, could drastically change or even undermine their hegemony. Unlike bitcoin and other cryptocurrencies, whose appeal is limited to a subset of people, Libra had the potential to reach billions of users in a relatively short period of time.

As a result, investors, crypto enthusiasts and regulators themselves say Libra has raised the stakes for financial authorities, forcing them to take a more serious look at digital currencies. Facebook-backed cryptocurrency Libra has been rebranded “Diem” and renamed its social networking firm’s wallet Novi, in a renewed effort to gain regulatory approval by stressing the project’s independence. Libra as a cryptocurrency project has been a rollercoaster since it was announced last year, facing huge criticism from regulators, asking for a scaling down of ambitions.

One recalls how the Libra concept was floated by Facebook last year which has now been slimmed-down last April after regulators and central banks raised concerns it could upend financial stability, erode control over monetary policy and threaten privacy.

The Financial Times reported that the launch of Diem could be happening as early as January, saying that it would go ahead after approval by authorities. Switzerland-based Diem Association, the digital token’s governance body, is in fact currently awaiting approval from the Swiss Financial Market Supervisory Authority.

The new Diem project would develop policies on anti-money laundering, terrorist financing and sanctions compliance and in a wide swept volte-face ditched earlier plans to allow anyone to join its network. In practice, Diem would operate as a digital currency, providing an alternative to the US dollar and other currencies managed by foreign governments. Just reflect on the level of public scrutiny faced by co-founder Davis Marcus and the CEO of Facebook, Mark Zuckerberg. This deluge pushed them to hit restart from a public relations perspective when last year they tried to launch Libra cryptocurrency.

One appreciates how Libra, as a blockchain project, had earned its share of notoriety between Congressional hearings and international regulatory scrutiny that led to the change of name and structure of Libra. Diem will stand out compared to other cryptocurrency offerings due to it being a stable coin, meaning it will be backed by real assets.

However, the Diem Association hasn’t commented yet on their assets of choice and according to The Financial Times, it is quite likely that Diem will be backed against the US dollar. Diem has the potential to bring huge benefits in the form of speed, efficiency and financial inclusion.

Furthermore, they act as a store of value for savers in countries that do not have stable domestic currencies, akin to the dollar movement that exists in many emerging-market countries today. How can one describe the advantages of stable coins? Well-structured “stable coins” emboldened with appropriate legal, regulatory and governance controls have a valuable role to play in the world economy and could bring the benefits of crypto technology to an entirely new generation of users. Diem, which as stated earlier was formerly known as Libra, is the most high-profile “stable coin”.

It has been a concept since 2019 when Facebook first announced its intentions on Libra which sadly was met with great alarm by global regulators. Libra was reviewed by the House Financial Services Committee which saw its co-creator, David Marcus testify at hearings. One may ask, why are regulators and central banks so concerned about “stable coins”?

These are cryptocurrencies that aim to stabilize their value compared to another asset – be it one fiat currency, a basket of fiat currencies or commodities. The idea is that by stabilizing its value, it can be used as a means of payment. In Malta, cashless transactions are becoming increasingly popular. It is clear, that if Diem should also catch on in Malta at some point, it would need ad hoc regulations to plug any loopholes. While the controversial Diem coin may struggle to see the light of day next year, Facebook Pay is a done deal. This exciting social network will start with its own payment service.

With this service, users should be able to send money to other users or shop in in-app shops. Donations can also be processed. Security is promised by PIN protection in payment transactions. The product is versatile as it can be used on Facebook itself, Messenger, Instagram and WhatsApp. It is not yet certain when Facebook Pay will be available in Malta, or generally in Europe, yet according to the company’s statement, Facebook now works with partners such as Paypal and Stripe on the processing of payment processes and can rest on existing infrastructures.

The other side of the coin shows that there are scaremongering doubts from US lawyers and financial officials on such crypto assets that are growing about possible money-laundering, drug trafficking or financial loopholes and tax evasion. However, it is in the news that the People’s Bank of China is planning comprehensive digitization of the Chinese currency under the title “DCEP”. The Chinese currency Yuan is to be replaced in the long term. This would make China the first country to introduce a national digital currency.

The cryptocurrency would first be accessible from commercial banks, which then circulate the digital coins on to citizens. Since there are currently speculations that DCEP will be a central currency, under this assumption, it would be subject to the authority of the Chinese government. Chinese banks could therefore get an even tighter control overflight of capital.

Looking to the future, the entry into force of any mainstream cryptocurrency could hit banks hard. The G7 finance ministers fear that any major currency should not be in the hands of a private company since they would have the same privilege as nations, but without undertaking the responsibility and obligations that go with it. The G7 ministers have called for tighter regulation of digital currencies, thus stalling the birth of Facebook’s Libra.

Back to Malta… Quoting a study of the Central Bank of Malta, it reveals that electronic payments are also becoming increasingly popular and it seems only a matter of time before cards and other cashless payment methods, such as Revolut, will completely replace banknotes and coins.

In conclusion, will Christmas bring in the exciting news that Facebook has now fine-tuned its financial strategy and will eventually give birth next year to Diem? Stop press – do not expect any Diem coins in your Christmas stockings!

 

Author: George Mangion
Published on The Malta Independent 15 December 2020
Get in touch: info@pkfmalta.com

Author: Jurgen Dalli – Junior Legal Associate, PKF Malta
Published on the Malta Chamber December 14, 2020

2020 has proved to be a chaotic year due to the unfortunate arrival of the novel coronavirus. With many countries going into lockdown and with the closure of multiple businesses in an attempt to contain the virus from spiralling out of control, business owners and employees have been financially devastated by these restrictions.

Every day, new undertakings are going out of business and every day more and more workers are being laid off as employers do not have the financial muscle to keep handing out salaries with little to no profit coming in. States have attempted to mitigate these ramifications by implementing schemes which saw employers and employees being aided financially during these times of turmoil.

The Maltese government also felt the need to support those businesses which were overwhelmed by the restrictions introduced to combat COVID-19. As a matter of fact, the Maltese Government launched three measures since the inception of the virus in Malta, three packages worth a staggering €1.8 billion which more or less tantamount to 12.9 per cent of Malta’s Gross Domestic Product (GDP) in the previous year (2019).

Despite this ambitious effort, many have gone out of business as the temporary closure of establishments proved too much for those who were already in a calamitous financial position as well as for those who fared fairly well prior to the pandemic.

The European Union responded to this pandemic by acting similarly to its Member States and allotting a number of financial packages to those countries which were devastated by the repercussions that COVID-19 brought with it. On 2^nd of April 2020, the EU proposed the creation of SURE or the temporary Support to mitigate Unemployment Risks in an Emergency.

This European instrument is available to the Member States in an attempt to mitigate the negative economic and social ramifications of the coronavirus outbreak. The EU is supplying loans to MSs to preserve as much employment as possible and has budgeted around €100 billion to address this reoccurring concern. SURE is acting as a second line of defence, aiding temporary measures to help Member States shelter jobs and income. As of the time of writing, SURE has generated a total of €90.3 billion in financial support to 18 Member States.

It goes without saying that those countries which were hit more aggressively by the virus were provided with a more lucrative financial package to rectify the substantial damage instigated by the pandemic. In fact, Italy and Spain, perhaps two of the worst affected EU countries were abetted by a monetary aid of €27.4 billion and €21.3 billion respectively.

Other MSs which were also relatively burdened by the pandemic were Belgium, Portugal, Romania and Greece which were granted a financial package of €7.7 billion, €5.9 billion, €4 billion and €2.7 billion respectively. Malta was also awarded a generous package given the economic and social challenges it went through 2020. SURE distributed €244 million in funds out of its budget whereby €120 million of this sizable sum have become accessible as of Tuesday 17^th November, whereas the remaining €124 million will be allocated shortly.

This was communicated by the European Union Commission President; Ursula von der Leyen on 16^th of November. The President said on an interview with a local news station that the Commission is aware that the pandemic has proved extremely problematic to control and that this second wave has seen a substantial increase in cases when compared to the first wave.

Hence, it has been assigning financial packages to those Member States who are most in need. The first instalments of financial aid by SURE was administered on 21^st of October and saw an inaugural social bond worth up to €17 billion.

The first €10 billion ought to be repaid by October 2030 whereas the remaining €7 billion must be reimbursed by 2040. The most recent package saw a total of €14 billion going out to nine EU Member States of which Malta formed part of. Commissioner Johannes Hahn who is in charge of Budget and Administration expressed how delighted he is that these measures are saving millions of jobs across Europe and how successful this instrument has proved to be in aiding European citizens during such harsh times.

It goes without saying that governments, as well as the European Union, will keep assisting those businesses and those individuals who have suffered from the novel coronavirus.

The battle against COVID-19 is far from over as the second wave does not seem to be calming down any time soon. More restrictions will keep being implemented as some countries such as the UK are currently undergoing a month-long lockdown in an attempt to reduce transmissions. This will undoubtedly prove to be fatal to many business owners and employees, thus these financial packages will still be required in the weeks and months to come until the situation comes to a standstill.

 

Author: Jurgen Dalli – Junior Legal Associate, PKF Malta
Published on the Malta Chamber December 14, 2020
Get in touch: info@pkfmalta.com

Author: George Mangion
Published on Business Today 3rd December 2020

The Economist Intelligence Unit (EIU) predicts a fairly sharp slowdown in America, from 2.3% to 1.7%, as trade tensions continue to depress trade and investment. A continuation of the global slowdown in manufacturing will also drag down growth worldwide. It goes without saying that a steam roller attitude towards a no-deal Brexit next month could make matters worse, for Britain and its trading partners.

In Malta, we also have our own home-grown unrest. Six weeks ago, the government submitted its final Moneyval report to the Council of Europe’s experts which includes new legislative changes implemented by the country after it failed an assessment of its anti-money laundering regime. Even if the coming Moneyval verdict on our performance in the fight against financial crime may not be as damning as some fear, the industry faces a major challenge to restore Malta’s reputation in international financial circles.

Years of disregard for anti-financial crime regulations cannot be wiped out merely through public relations and marketing. In an interview, the chairman of FinanceMalta said he was eager to get on the first available flight to spread the good news that Malta is open for financial services business as soon as the inconveniences caused by the pandemic are behind us.

This may be a forlorn wish since, during the past year marking his appointment, there was nothing he could do to prime the pump. Although financial markets have recovered from heavy devaluations in spring, yet COVID-19 has now entered into a stronger second wave. Authorities around the world are called upon to remain vigilant, quickly identify adverse developments and react, using the full scope of their mandates, where needed. Many agree that the reputation damage to the island as a financial domicile resulting from political turmoil is palpable.

As they say – it does not rain – it pours. Another scandal of international scale concerns the use of shell companies in Malta to shield dubious billionaires in their drive to avail themselves of the favourable tax regime. A particular case involves an African princess of the dos Santos dynasty in a scheme valued at $2.2 billion by Forbes. The damage is exacerbated by the forced closure of three local banks. These were small private banks:  Nemea, Satabank and an Iranian owned bank, Pilatus.

The reprimand on Bank of Valetta by the ECB over AML and governance issues did send shock waves since this is a major bank with a majority shareholding held by the state. Since 2013, it was run by a chairman appointed by the government. The chairman then was the ex-managing director of RSM – the firm auditing the Labour Party. He has since been replaced by a popular economist in government circles – Dr Gordon Cordina.

More sad news followed such as the fine of €340,058 imposed on Lombard Bank by The Financial Intelligence Analysis Unit (FIAU), which found the bank breached five separate anti-money laundering provisions. It reported that in one case the bank failed to properly ascertain the source of funds of a politically exposed client.

The inadequate information held on file about the origin of the wealth of three other clients convinced the FIAU that it needed to penalise Lombard on inadequate enforcement of anti-financial crime directives. Lombard informed its stakeholders that it has always been and remains committed to preventing financial crime contemplated by its clients and appealed the fine.

The Malta Financial Services Authority (MFSA) launched enforcement proceedings against four local operators last month, levying fines of €15,000 each on two entities and stripping the other two of their licenses. The sudden resignation of the MFSA CEO, appointed only 18 months ago following the scandal of his accepting a free Las Vegas trip from Yorgen Fenech – seemed to break the camel’s back.

The arrest of Yorgen Fenech, owner of the secretive 17 Black company, as a person of interest in the assassination of journalist Daphne Caruana Galizia, and having close links with the former prime minister’s chief of staff (now also probed by police), heightened the anger of the crowd fearing collusion.

All these factors have taken their toll on public opinion while we are still feeling the cold blast of negative publicity following the disclosure of secret Panama companies in 2015 registered by Nexia BT (representing disgraced Mossack Fonseca) destined for top members of the cabinet.

To return to normality, Malta needs to look ahead; all stakeholders, including the government, national authorities and market operators must put financial crime compliance at the top of their agenda and continue enhancing internal controls to strengthen the fight against money laundering and terrorism funding.

The past years has seen several protests sparked by the damning revelations by the independent media and developments which emerged during the staggering public inquiry in the Caruana Galizia murder. To exacerbate matters, there have been occasional power blackouts which Enemalta (the state-owned utility) promptly blamed on ships laying anchor and seriously damaging the Sicily/Malta submarine electrical cable.

Moving on, Abigail Mamo, CEO of the Malta Chamber of SMEs, said that the chamber received calls from restaurants, retailers, grocers complaining of reduced business once the surge of orders spurned by the issue of cash vouchers abruptly ceased. Other worries concern poor trade during Black Friday.

Back to the theme regarding the reputation of Malta’s financial services sector, this can only be regained through hard work and patience.

Hopefully, Moneyval’s greylisting will never materialise. Then, Malta will have its work cut out to convince international regulators that we do not only enact good laws to prevent financial crime but also actually implement these laws with a steely determination.

Undoubtedly, the pandemic has caused many businesses to accumulate losses and some even close down. However, those who took the right steps to mitigate the situation are still making some profit, even if not so much. The truth is, the pandemic will go away next year with the help of vaccines and when it does, all industries that sharpened their knives during the slow-down will thrive and start making money.

We recently witnessed a major reshuffle of cabinet posts in the hope that new blood may speed up further AML reforms. Our redemption can triumph if we plant a root and branch reform backed by checks and balances in a concerted drive to strengthen the three pillars of good governance, the rule of law and democracy.

 

Author: George Mangion
Published on Business Today 3rd December 2020
Get in touch: info@pkfmalta.com