6 - 12 September 2001

Is the scheme attractive enough to convince investors?

by Ivan Brincat

The decision to launch a scheme for the repatriation of Maltese funds abroad has been praised by the Association of General Retailers and Traders, however he questioned whether the scheme was attractive enough to bring back investment to Malta.
Vince Farrugia, director general of GRTU told The Malta Business Weekly that any move to encourage people to bring their money back to Malta and increase the availability of cash on the island was important in the light of the current economic climate.
Last week, finance minister John Dalli estimated that there are over Lm1bn invested abroad by Maltese, money that has not been declared.
Mr Dalli called on those with investments abroad to regularise their position because they might have to pay higher taxes than the standard 15 per cent withholding tax.
Analysts contacted by this newspaper said the government’s move can be seen to be both positive in that it is an effort to increase liquidity and the banks’ cash flow, or an attempt to increase government revenue through the withholding tax.
Mr Farrugia said that banks
had a problem with liquidity, otherwise they would not be putting pressures on companies to pay
up.
He said that any move to increase the capital base in Malta was important but asked whether the scheme was attractive enough to attract investment.
Mr Farrugia said the growth experienced by the economy in the late 1980s and early 1990s was heavily financed by Maltese who had money invested abroad but who had decided that the time was ripe to invest in Malta.
However, increased taxation and the way profitability of firms in various sectors was crumbling might not convince people who have funds abroad to bring them back and invest in Malta.
“Unfortunately, over the past year, we have had more cash outflows even from foreign companies who invested in Malta and were making money here. Some companies would invest further in Malta but now even they are investing their capital abroad.”
What was important, he said, was to instil faith and trust in the Maltese economy, something which was lacking at present. “What is crucial at this stage is to have a pro-business budget.”
The scheme for the repatriation of funds was launched on 1 September and will remain in place till the end of next year.
It will enable Maltese citizens with funds abroad to bring them over to Maltese banks or financial agents without the need to inform the government or the central bank about the money as long as they pay the 15 per cent withholding tax.
They will be given a certificate which can be used if there is a query regarding the origin of the money from the Department of Inland Revenue.
This means that if Maltese citizens who bring back money to Malta use it to invest in property or to buy other things, the certificate would be good enough as proof for the Department of Tax as to the source of income. It is now common practice that every country gives information regarding the deposits of foreign citizens in their country. This is being done to combat money laundering as well as for taxation purposes.
This means that the Maltese government will have the ability to get to know the details of those Maltese who have investments or deposits abroad.
Mr Dalli said the Maltese system of banking secrecy, unanimously approved in Parliament, and the 15 per cent withholding tax on interest, ensures that Malta is the best place to invest money.