23 May 2007

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Slow but steady response to Government scheme on hoarded cash

Karl Stagno-Navarra

Banks and stockbrokers are reporting a “slow” but “steady” response from the general public to a government amnesty intended to encourage a gradual and orderly surrender of an estimated Lm250 million undeclared hoarded cash, and to facilitate its integration into the formal economy through the financial system before the country’s adoption of the Euro as its national currency.
Speaking to BusinessToday, leading stockbrokers explained that it is still very early to determine if the scheme managed to leave its mark, given that the closing date is set for July 31.
While Government and the Central Bank are regarding the scheme as a “one-time opportunity” for individuals to regularise their position in respect of their holdings of eligible assets in those cases where the associated income has not been declared for the purposes of the Income Tax Act, many stockbrokers are receiving enquiries from a number of persons.
“It seems that many are doing their homework and weighing their options well,” said one financial advisor, adding that interest towards the scheme is expected to gain momentum by mid-June when the count-down begins towards the end of the scheme.
Also eligible to benefit from the scheme are deposits in both Maltese Lira and in Euro held with local banks, where such assets represent income which was not declared for the purposes of the Income Tax Act.
Registration will be covered by confidentiality and all appointed registration agents and the Central Bank are bound by the duty of professional secrecy.
Registration of Maltese Lira or Euro notes will be subject to the one-time payment fee of four per cent of the registered amount, while registration of Maltese Lira and Euro deposits with local banks will be subject to a six per cent fee.

Parliamentary Secretary Tonio Fenech who launched the scheme last month, insists on not calling the scheme an amnesty, however he admitted that it is the only “reasonable” measure government could adopt to protect the economy from the serious dangers it faces as the country gradually approaches the adoption of the Euro.
Government, he said, is aware of the inevitable impact such amounts of undeclared monies would have on the economy, particularly through the generation of artificial inflation within the property markets and other vulnerable sectors.
According to Central Bank intelligence, an estimated Lm4 million a month is currently being exchanged for Euro on the streets, with a serious risk of having the market flooded with counterfeit Euro notes to the detriment of numerous life-time savers.
While making it clear that the scheme does not exempt any person from complying with the requirements of the Prevention of Money Laundering Act and related regulations, Tonio Fenech explained that any applicant who would like to regularise his position with respect to undeclared hoarded cash may do so by registering by Central Bank appointed agents, who in this case would be banks, stockbrokers and other financial intermediaries.
Upon registration under the scheme, the beneficial owner of the registered assets will be exempted from retrospective action by the government in respect of undeclared income represented by such assets in terms of the Income Tax Act.

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