Dancing in the dark

Source: Mr George M. Mangion¸ PKF Malta

As published on The Malta Independent on Sunday 23rd February 2014

Attending a family wealth conference in St Petersburg last week I met service providers promoting their countries showing off the various wealth preservation techniques and investment options available for the high heeled clients. It was remarkable that Malta as a country came in late when I compare what a host of other countries are offering .Their treasure chest includes citizenship¸ low personal tax for foreign experts and attractive permanent residence schemes to investors who qualify but it is better late than never. Our scheme for citizenship compares well both for its reasonable amount of contribution payable but more so for the number of doors it opens for the successful applicant. With hindsight I could reflect how Cyprus started offering free citizenship to deposit holders who lost over €3 million in the last year „hair cut” as a result of their deposits in Laiki and/or Bank of Cyprus .A thought lingered in my mind that Cyprus is indeed in dire straits and perhaps Malta by comparison boasting of ” Finanzi Fis -sod “should never prostrate itself so low as to be willing to sell its passports but more about this topic later. Cyprus had suffered a complete melt down of it huge banking sector partly due to its deep involvement with Greek banks and as a result of the Troika decision to invoke a “bail-in” meaning its bank deposits over €100 K (mainly foreign) had to suffer a 40 to 50 % hair – cut so in an effort to restart the economy it quickly devised a scheme to grant citizenship at a price to foreign investors. The applicant had to invest at least two million euro in shares or bonds of the National Cyprus Company and donate 0.5million euro to the Research and Technology.

Back to Malta and prima facie one may shy away from devising a similar scheme to that devised by Cyprus whether it is linked to an upfront contribution or combined with a deposit in government bonds and a property acquisition. By comparison in the Caribbean one meets with many such offers which mostly include an interest free loan for a luxury resort yet to be developed. So the question arises does the Maltese economy really needs the windfall of 2 to 3 billion euro over the next three years? This windfall takes into consideration that Government is putting a cap on total applications and expects that the 1¸800 top limits will be reached within a three year window. To start with let us consider how the national debt reaches over 6 billion euro (approx 80% of GDP) and our annual deficits are hovering over the 3% of GDP for the past two decades with a higher rate reached in 2009 which exceed the Maastricht criteria.

The respectable rate of growth of 1.9% registered last year depended a lot on the huge contribution from the gaming sector which accounts to 10% of the annual GDP which now exceeds the yield from tourism. Both sectors are volatile and need careful nurturing to maintain future growth as competition is hotting up particularly