Swiss Dividend

The Malta Independent Swiss Dividend

The Feira EU Council Meeting of 19/20 June gave a quick dividend to the Swiss bilateral arrangement negotiated with the EU outside the membership route.

The EU leaders spent most of their summit time negotiating the final touches to the question of bringing fiscal uniformity to the treatment of interest on investments and savings which residents of the EU have cross (no longer existing) border with banks of other member states.

Having made substantial progress on the single market and the economic and monetary union project, it is inevitable that uniformity must also come in the question of fiscal policies especially for cross-border transactions among persons from member states.

Up to the Helsinki meeting of last December the project was meant to achieve uniformity through the tax at source concept. This found the strong opposition of the British who feared that such an imposition would drive the Eurobond market out of London.` In the negotiations leading to the Feira meeting the concept was changed to a duality; either pay tax at source or else be subjected to full disclosure of interest payment to the home tax authorities.` Quite similar to the domestic fiscal treatment of interest revenues!

At Feira, `Britain demanded that the duality should be restricted to the transitory period only and the final position was to be full disclosure.` This was resisted mostly by the Austrians. They finally conceded provided that they will be allowed to keep the tax at source arrangement with bank secrecy for its own residents.

Where does this leave Malta as an applicant country to the EU` Firstly it was decreed at Council level that no derogation from exchange of information requirement shall be granted in enlargement negotiations with accession countries. So we will be obliged to share information about non-resident depositors with their home country tax authorities. This will remove one of the attractions we have been promoting to build our international financial centre.

Secondly Britain has committed itself to adopt the same measures in the Channel Islands, Isle of Man and dependent or associated territories in the Caribbean. So these international financial centres can also lose their major tax haven attraction of banking secrecy. This could expose to the local exchequer substantial interest revenues earned by domestic residents `which are currently beyond its reach in these financial centres so familiar to many Maltese.

Against this scenario Switzerland, Monaco, Andorra, Liechtenstein and San Marino are also expected to come on line with this new EU initiative and the EU has marked a two-year period of negotiations to achieve this aim.` However these countries have no obligation to comply and the Swiss reply to such an approach was quick and sharp.

A raised eye-brow, a reference to the fact that they stayed out of the EU not to be obliged to adhere to decisions taken by others and a quick counting of their dividends.

Even if matters take long to materialise the psychological blow has been dealt. Banking secrecy for non-dirty money can only be guaranteed in financial centres outside the EU and totally independent of any EU member countries.` With the Swiss model and with our financial legislation gaining international recognition as a sufficiently protective against attraction of dirty money, Malta too could also have been counting its dividend. But our one-way EU policy has landed us with the worst of both worlds. Giving up the benefits of being out without enjoying the benefits of being in.

Alfred Mifsud