Our EY 2107 attractiveness survey and conference entitled ‘Thinking without the box’ have generated an unprecedented level of interest. Almost 900 participants flooded the hall and another 5,000+ took it in online. Grabbing the media headlines across the board, the event has truly become the benchmark on foreign investment, economic analysis and future trends.
But what we do is about much more than the number of participants and headlines. Over the past three years we moved beyond survey analysis to putting forward concrete proposals on them. To build a better working Malta. We floated ideas on logistics, blockchain, fintech and more. It is rewarding to see that the latter two are now gaining real traction.
This year we are making other recommendations.
Let’s start with our cashless society proposal.
We are seeing an evolution in the payments ecosystem. Today, credit cards are by no means the only option to pay as digital wallets are growing in popularity. Contactless payments are becoming more popular and we have seen these being launched in Malta too. Concurrently, biometric solutions using fingerprints or eye scanning are increasingly more widespread.
All new payment solutions share the same goal - helping customers make faster, safer and more convenient transactions. Some countries are almost there already. The Guardian reports that in Sweden “buses have not taken cash for years, it is impossible to buy a ticket on the Stockholm metro with cash, retailers are legally entitled to refuse coins and notes, and street vendors – and even churches – increasingly prefer card or phone payments”.
Prevalence of cash use varies across Europe – 48 per cent in Britain, 20 per cent in Sweden, to name two. At our event, HSBC Malta CEO Andy Beane noted that Malta has the most cash intensive economy in Europe. Eddie Norton, HSBC’s regional head of Global Liquidity Cash Management observed that cash absorbs a massive 88 per cent of transactions in Malta.
To be sure, notes of caution are also being struck. Germany’s central bank head, Jens Weidmann, for instance, is reported by Bild as saying: “It would be fatal if citizens got the impression that cash is being gradually taken away from them.”
Cash transaction limits are now common in most EU countries. In France, it was lowered from €3,000 to €1,000, and Portugal has recently undertaken similar measures.
In its 2017 inception impact assessment for its proposal for an EU initiative on restrictions on payments in cash, the European Commission states that:
Cash absorbs a massive 88 per cent of transactions in Malta
“Cash has the important feature of offering anonymity to transactions. Such anonymity may be desired for legitimate reason (e.g. protection of privacy). But, such anonymity can also be misused for money laundering and terrorist financing purposes. In that context, there remains the lack of readily available and solid evidence on legitimate versus illegitimate cash transactions. It is difficult to quantify the legitimate or illegitimate use of cash. Information stemming from law enforcement investigations indicates that cash, both for criminal payments and money laundering purposes, remains the instrument of choice.”
A recent Times of Malta report noted that “the non-observed economy” was estimated to stand at about three per cent of the country’s GDP, quickly adding that the real figure was likely to be far higher.
If limiting cash payments can harness even part of this ‘non-observed’ activity, should this not be considered by Malta even before any action could potentially be mandated by Europe?
In its 2017 Budget, the government announced the setting up of a Joint Enforcement Task Force to drive the elimination of tax evasion. It is time to realise that paying taxes and ensuring a level playing field, transparency as well as efficiency in settlement are complimentary, not conflicting, goals.
We welcome measures that combat tax evasion. At the same time we would like to raise some questions:
Should Malta put tight cash limits in place?
Should the country promote and incentivise alternative payment systems - contactless cards, phone payments and other electronic means of payments? Perhaps some tax credits or other benefits could be provided to businesses that manage to move away from cash.
Should electronic systems be introduced to link cash deposits by traders to source (e.g. cash registers)? Systems in the 21st century can be employed to do this much more effectively than ever before. Simultaneously, any system may be introduced on a voluntary basis, granting benefits to people opting in.
Like any other major changes, these will require a period of challenging, perhaps difficult, adjustment. But the resulting wider and deeper social and economic benefits will make the effort worthwhile. It is time to think, so to speak, without cash in the box.
Ronald Attard is Country Managing Partner of EY Malta.
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