Setting a precedent in international finance
Minister John Dalli yesterday explained that the had taken its toll
on smaller countries with limited resources and on operators in the
areas affected but that Malta has still made considerable progress in
the area. However, changes to certain adjustments must still be made
to Maltas legislation in order to upgrade its profile and to honour
agreements made with the Organisation for Economic Co-operation and
Mr Dallis comments came while he was addressing at the Third
Meeting of the Global Forum Working Group on Effective Exchange of Information,
which is due to concentrate mainly on the continuation of the development
of a legal instrument for effective exchange of information.
Mr Dalli explains that the recent initiative by the OECD on harmful
tax practices has resulted in a substantial increase in work and expense
has had a large impact on smaller countries with limited resources.
Furthermore, Mr Dalli explained that such adjustments have also created
certain problems in terms of concerns of those operating in the sectors
Speaking on the progress made so far in area, Mr Dalli explains that
Malta recognises that it still needs to adjust its legislation in certain
areas to upgrade its profile and to honour the commitments that were
made, "We are already working very actively in developing the required
legislation although we are not obliged to implement before 2005. A
meeting has also been held in Malta with OECD officials with a view
to discussing some details regarding Maltese legislation relating to
the commitment that Malta has given."
In this sphere, he adds that it is essential that the OECD recognise
the efforts made by the Advance Commitment jurisdictions, while keeping
them constantly abreast with all developments in the projects
Mr Dalli also referred to information in circulation to the effect that
pressure may be building which could result in a rethinking on some
aspects of the OECD project on harmful tax competition.
He comments, "In fact, the original timetable established by the
OECD has been changed. Moreover, it is not very evident to non-OECD
member countries whether or not there will be consensus by all OECD
member countries on effective exchange of information.
"Certainty is very important in this area and non-member countries
need to know what the actual position is since transparency is essential
for the ultimate success of this project. I must stress, that any implementation
plan by committed jurisdictions should be conditioned to an assurance
that they will be competing on a level playing field with all other
respectable jurisdictions and their dependencies."
Mr Dalli also reminisced how, in July 1998, Malta had received a first
notification from the OECDs Chairman of the Committee on Fiscal
Affairs, that they had created a Forum on Harmful Tax Practices
that might examine Maltas jurisdiction under the criteria set
out in the OECD Report on Harmful Tax Competition.
He comments, "The first spontaneous reaction was one of exasperation.
We were told that the Committee had targeted jurisdictions whose names
appear frequently on published lists of tax havens. We did not really
understand this rationale considering that we were not told what these
publications were and that the Maltese authorities did not have any
control on such publications.
"Moreover, it was Malta's policy not to project itself as a tax
haven, particularly in view of the fact that our systems are modelled
on and have clear parallels with those found in other respectable European
In a letter that had been sent by the Chairman of the Committee on Fiscal
Affairs, it had been specifically asked what measures Malta had taken
to offset any harmful effects that our tax regime may have on other
Mr Dalli adds, "In our view, Malta had set a precedent in the world
of international finance by unilaterally taking corrective action and
introducing legislation way back in 1994. This legislation ended the
offshore regime in Malta and established an orderly phasing out of all
the existing offshore companies by 2004. This exercise developed a comprehensive
set of laws for the financial services sector that totally integrated
into the total legal framework in Malta. It achieved our purpose to
establish a comprehensive legal package that would provide a solid basis
for Malta to establish itself as a reputable financial centre.
"The complexity of the exercise can be gauged from the fact that
about 14 pieces of legislation were enacted that ranged from the enactment
of totally new laws to enhancement, amendment and consolidation of existing
legislation at the time. The legislation that was approved unanimously
by the Maltese Parliament in 1994 follows general internationally accepted
practice and conforms largely to EU standards."
Although Malta had not fully agreed with the OECDs original approach
with non-member countries, Mr Dalli explains that Malta had not seen
any reason why it should not co-operate fully with the process that
had been commenced - once Malta's regulatory and tax legislation was
already very much in line with that of other European jurisdictions.