Maltese offshore holdings are believed to have reached a staggering €5.2 billion – the joint highest rate in the EU in terms of the size of the economy.
The figure is equivalent to roughly half of the island’s GDP.
A document released as part of the European Commission’s ‘Taxation Papers’ series sheds light on the extensive offshore wealth owned by the Maltese and their inclination towards stowing their assets overseas.
Taxpayers in Cyprus and Malta, held about half their wealth abroad, the highest in the EU, according to the report.
To put it in perspective, the EU average is only around 10 per cent of GDP, with countries, including Denmark, Finland and Sweden at less than five per cent.
The report, entitled ‘Estimating International Tax Evasion by Individuals’ focused on wealth held in Type II International Financial Centres (which are largely, but not exclusively, offshore and secretive).
A closer look at the estimates for Malta show that back in 2001, offshore holdings were believed to total €1.6 billion. This figure remained fairly stable until 2006 when it abruptly doubled to €3.4 billion.
It quickly returned to the same rate as in previous years, before climbing up from €2.3 billion to €5.4 billion between 2011 and 2016.
The document largely relies on a collection of different public statistics published by international organisations and a number of statistical assumptions.
For instance, the rates and characteristics of tax systems in each member state was based on the European Commission’s Tax in Europe Database. This was combined with country profiles from the Organisation for Economic Co-operation and Development (OECD).
Financial services practitioners consulted by Times of Malta said the local figures seemed “fairly realistic” but were quick to point out that statistical assumptions and the methodology used to arrive at final figures would have to be closely scrutinised to be certain of their validity.
Not surprisingly, member states with the largest shares of offshore wealth are the EU’s largest economies. Germany, the UK, France, and Italy contribute more than 65 per cent of the EU’s estimated offshore wealth.
Offshore wealth held by EU residents in 2016 was estimated at €1.5 trillion. As a ratio of GDP, there was actually a notable decrease, from 16 per cent in 2001 to 10 per cent in 2016.
At a global level, the first key result of the research is that estimated global off-shore wealth stood at €7.5 trillion in 2016, or 10 per cent of global GDP – a considerable amount, the document says.
The report highlights three major episodes in the fight against international tax evasion and their impact on estimated offshore holdings.
The first is the EU savings directive, an anti-tax evasion measure which requires member states to share taxation information on interest paid. This came into force in 2005 but had no major impact on offshore holdings as the rates continued to climb at the same rate seen in the following years.