13 October 2004

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Lawyer says government was aware of Brussels embassy tax implications

By Kurt Sansone

The tax implications of renting out four floors of Malta House in Brussels for commercial purposes risk turning into a political and fiscal complication as lawyer Peter Caruana Galizia yesterday told the Public Accounts Committee that he had prepared a report for Mimcol outlining the tax implications of any decision taken by government.
Until Monday Prime Minister Lawrence Gonzi had been at best hazy about whether government would risk losing its diplomatic tax exemption if it rented out four floors of the building for commercial purposes.
The lawyer, husband of columnist Daphne Caruana Galizia, said he had a number of meetings with Belgian accountants prior to the purchase and reported back to Mimcol on the tax implications of purchasing or renting property in Brussels.
“Government was exempt from Belgian taxes on the condition that the building was purchased by the State for the use of the State. If it passes the property to the private sector, it will lose the tax exemptions,” Caruana Galizia told the parliamentary committee.
Yesterday marked the second day of the inquiry conducted by the Public Accounts Committee into the purchase of the Brussels embassy, which has cost around Lm6.5 million to purchase and a further Lm2.5 million to refurbish.
Pressed by Labour MP Leo Brincat to clarify the issue on tax exemptions, Caruana Galizia said that although his speciality was not tax consultancy, as government’s legal advisor he was “aware of the tax implications”.
And if it were up to entrepreneur Bertu Mizzi, government should not be renting out the four floors. Mizzi was the first person summoned yesterday in front of the committee. In typical business-speak, Mizzi said that he would purchase the property in Rue Archimede from government for the same price that was paid.

Asked for his personal view on the commercialisation of four floors, Mizzi said he would advise government against the option. “Government may need those four floors for possible future expansion,” Mizzi said.
Mizzi denied he was influenced by anyone in government circles to reach a deal over the purchase of 25 Rue Archimede. “I reached my own conclusion but it was government that decided. It was I who suggested the price to the Belgian firm because they were initially intent on renting rather than selling,” Mizzi told the committee.
Asked about how he calculated the price, Mizzi said that he compared it to the asking price for two other properties in the same area and the rent being asked by the Belgian firm.
What appeared odd in yesterday’s hearing was the role played by Richard Cachia Caruana. Both Mizzi and Caruana Galizia denied having any contact or pressure from Malta’s Permanent Representative, even if they believed he was the person giving instructions to Mimcol chairman Ivan Falzon.
Cachia Caruana on Monday, however, said it was former Foreign Minister John Dalli who chose Bertu Mizzi to lead the final negotiations. Yesterday Mizzi said he was contacted by Cachia Caruana.
“Cachia Caruana contacted me and asked me whether I was interested in negotiating the final deal as government intended purchasing an embassy in Brussels. I accepted and Mimcol asked me to negotiate on three particular properties. Since the first phone call I received from Cachia Caruana, I never discussed the issue with him. I did not receive instructions from RCC,” Mizzi said.
Caruana Galizia, a personal friend of Cachia Caruana, on the other hand said he was surprised when he received a phone call from Mimcol Chairman Ivan Falzon in June 2003. “I never applied to be their legal representative. It was a surprise for me, out of the blue,” Caruana Galizia said, confirming that his choice was by direct order.
Caruana Galizia described his role as Mimcol’s lawyer on the final acquisition.
“I had no direct contact with Richard Cachia Caruana, I never received instructions from him and he never influenced my decisions,” Caruana Galizia told the committee. “I believe Ivan Falzon kept Cachia Caruana informed all the time and I understand that the ambassador had a say on the choice of the building to be purchased.”
Another person to appear was architect Martin Xuereb, who confirmed that in the initial phases there was talk of converting one or two floors into a residence, but these plans had been abandoned after it proved structurally cumbersome and too expensive to carry out.

kurt@newsworksltd.com



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