Updated at 10.45am.
An EU tax on so-called golden passports is among suggestions the European Parliament is putting forward to address long-standing concerns over controversial citizenship schemes.
In an extensive working report, EP experts argue that a tax would “reduce incentives” for wealthy people to use the scheme, thereby limiting the potential risks they pose.
The measure would lower passport-selling countries’ profits from such schemes, diverting tax dues to member states that do not have similar programmes.
While the report does not propose a specific tax rate, government sources told Times of Malta that preliminary discussions had floated the idea of 15 per cent of annual passport revenues.
The report also suggests regulation on conditions, guarantees and safeguards to promote transparency and facilitate audits at European Union level.
The EP document is essentially an academic exercise exploring different possible policy scenarios.
MEPs debated passport schemes in October 2020, with the majority of speakers coming out against EU citizenship being traded as a commodity.
Malta’s scheme, launched in 2014, generated €1.5 billion over six years.
In 2019, the European Commission identified the golden passport schemes as raising the risk of possible infiltration of non-EU organised crime groups, as well as money laundering, corruption, and tax evasion possibilities.
Malta’s original Individual Investor Programme has since been replaced with a new scheme with stricter controls.
Malta is currently involved in a legal dispute over the programme with the European Commission threatening to take the country to the European Court of Justice.
The EP document, known as a European Added Value Assessment, proposes five different policy approaches to dealing with passport sales.
The first is a minimum physical presence requirement, which would establish a period during which the applicant and their family members must be physically living in the country.
Alternatively, the report suggests the EU could impose a condition whereby all member states operating such schemes would be required to “align their vetting and due diligence measures with those established in the EU”.
The report says common regulation would increase transparency and lower the risk of money laundering and tax avoidance posed by such schemes.
It would also lower demand for such schemes in third countries and lower security risks.
The report also suggests that lawmakers consider phasing out all citizenship and residency schemes completely.
Schemes pose security risks
The EU has never been keen on such schemes and has repeatedly called on member states, including Malta, to phase them out.
During an official visit to Malta last month, EU Commission President Ursula von der Leyen said it is of “utmost importance” that Malta stops its passport scheme.
The report explains that such programmes are concerning because of the risks they pose.
“Member states [operating these schemes] may violate the principle of sincere cooperation... this could be a security risk due to high-risk third country nationals entering the EU without a visa,” the report says.
It adds that such schemes “risk the commodification of EU citizenship and residency rights,” ultimately “devaluing EU citizenship.”
They also pose the risk of “weak vetting and due diligence systems,” opening a path to “corruption, money laundering, security threats and tax avoidance.”
“Indices show [these] schemes are more likely to be found where there is higher financial secrecy and/or poorer control of corruption,” the report says.
The report also claims they create “harmful tax competition, lower access to housing” and create an “uneven playing field for member states”.
According to the report, the EU parliament is less concerned with the lack of a ‘genuine link’ with the EU or the member state and more concerned with how the schemes unjustly favour wealthy people on the path to citizenship.
“Attention should be paid to discrimination and the lack of fairness when comparing [these] schemes with traditional pathways to residence and citizenship in the EU, particularly for labour migrants and their family members.”
However, the report also acknowledges that the programmes are gaining ground globally. It says more than 60 countries have such initiatives in operation and the number of EU states that have adopted citizenship schemes have shot up from four in 2011 to more than half the EU states today.
“In total, at least 130,000 persons have gained EU citizenship or residence under investment schemes that have brought in over €21.8 billion.”
Speaking in parliament yesterday evening, Citizenship Parliamentary Secretary Alex Muscat said the EP had acknowledged that such schemes were widespread, and it was difficult for Brussels to stop them.
Muscat said the EP document acknowledged the Maltese programme is among the “best” across the EU.
He said Malta is currently engaged in talks with the European Commission over the possibility of legal action.