IFSP 2022 Conference: The Challenges Facing Financial Services in Malta
Held on April 7 at the Xara Lodge – with some delegates also joining virtually – the IFSP 2022 Conference brought together industry practitioners to discuss the way forward for financial services in Malta.
The conference, titled Revitalising Financial Services – Mapping a Sustainable Path for Malta, welcomed keynote speakers including President of the European Parliament Roberta Metsola, Minister for Finance and Employment Clyde Caruana, Nationalist representative Ivan Bartolo, MFSA CEO Joseph Gavin and Joseph Zammit Tabona from the Malta Financial Services Advisory Council.
Panels of leading practitioners also joined discussions on the key themes and challenges that this hugely important economic sector currently faces on the road to revitalisation, as follows.
The contribution of financial services to the Maltese economy
The material contribution of Malta’s financial services sector to the national economy was a central theme at the conference.
The IFSP, Malta Institute of Accountants and the Malta Institute of Taxation co-commissioned a survey to take a snapshot of the industry, to form the basis of revitalising financial services. Leading economist Gordon Cordina from E-Cubed Consultants Ltd conducted the survey and offered a presentation of its conclusions to attendees.
“As an economist, it is important to approach the problem from a wider perspective of policy and business behaviour, rather than from a strictly statistical perspective, which categorises a number of firms in the country as being financial services related,” Dr Cordina explained. “There are already studies that statistically define the financial services sector, but do not give sufficient importance to common competitiveness elements such as the rating by the international institutions, the tax situation and policy, as well as other framework conditions including labour market, efficiency, or public sector services provision. These, financial services shares with other sectors in the economy, so it is important to have a wider view of what is at stake when we discuss the industry’s shocks and challenges.”
In the survey, based on 2019 figures and titled The Contribution of Export-Oriented Foreign Direct Investment in the Services (EFIS) Sector to the Maltese Economy, Dr Cordina highlighted that the three main economic injections are exports, creation of productive assets and government expenditure or private consumption. Together, he noted, these create a substantial demand for business activity and an economic value added of more than €12.5million.
In conclusion, Dr Cordina noted that the survey’s figures show that the sector raises the overall average economic growth rate, while impacting the rest of the economy both in terms of infrastructure and employment.
Following Dr Cordina’s presentation, a panel discussion featuring David Delicata (Malta Institute of Accountants), Geraldine Schembri (Malta Institute of Taxation) and IFSP President Tonio Zarb highlighted noteworthy aspects of the survey’s findings, such as tax figures, the outstanding contribution of the expat community, productivity, the need to create a competitive employment environment and the gender gap.
The impact of Malta’s FATF greylisting – and the need for unity in its wake
A key area of discussion at the IFSP Conference was Malta’s FATF greylisting.
All speakers explored the impact on financial services following the country’s addition to the FATF grey list in June last year, with many highlighting the FATF’s February 2022 review, which had noted good progress in terms of reforms.
Juanita Bencini, Chris Buttigieg (MFSA), Rakele Cini (rklAdvisory), Anthony Cremona (Ganado Associates) and Kenneth Farrugia (FIAU) also led a panel session on Life after the Greylisting.
Practitioners shared that the implementation of measures – particularly AML requirements – and stringent process inspections have caused widespread difficulties, but those present congratulated teams across the industry that have risen to the occasion admirably.
Likewise, speakers encouraged unity across the political divide as Malta worked towards removal from the grey list, both to restore the sector’s international reputation as a reliable finance centre and to reinforce sustainability.
“Reputation starts with each and every one of us; the reputation of practitioners who, every day, make sure to do the right thing,” said IFSP Education SC Chairman Mirko Rapa Manche in his closing address. “Keeping the reputation of our country is now more important than our individual reputation. We need to protect our country’s reputation at all costs and continue working together – it’s not ‘us’ versus ‘them’, or authorities versus practitioners. The more we work together, the more we achieve results.”
Malta’s tax system and the latest tax developments
A recurring topic of discussion was recent tax developments, including the Pillar Two initiative by the Organisation for Economic Cooperation and Development (OECD), which introduces a global minimum corporate tax rate at 15 per cent for companies with revenue of above €750 million, and the proposed Anti-Tax Avoidance Directive (ATAD 3).
A panel session with Neville Gatt (PWC), Andre Zarb (KPMG), Conrad Cassar Torregiani (Deloitte) and Robert Attard (EY) asked if Malta’s tax system is at a crossroads. Another, featuring Juanita Brockdorff (KPMG), Chris Curmi (Deloitte), Ramona Azzopardi (WH Partners), Bernard Attard (PWC), Kirsten Debono Hutchinson (Camilleri Preziosi) and Ivan Zammit (Sheltons Group) addressed the challenge of the proposed EU directives.
In her address, Dr Metsola also recommended that Malta explore alternative methods of attracting investment beyond a low-tax status.
Inflation and economic sanctions following the Russian invasion of Ukraine
Many speakers also pointed toward the ongoing situation in Ukraine and the long-term impact of related economic sanctions on Malta.
Clyde Caruana in his address pointed toward inflation that has the potential to skyrocket the prices of food and goods, without significant governmental intervention. He also highlighted the need for the country to remain competitive, while also making sure to help those experiencing hardship resulting from rising inflation rates.
Ease of doing business, in a sustainable financial services sector
Sustainability was a primary part of the IFSP Conference’s overall theme.
“We chose the title of this conference with intent,” said Tonio Zarb in his opening address. “We need to revitalise the financial services sector while realising our ambition to grow the sector and build a sustainable international business service centre that does us justice.”
Likewise, all speakers agreed that, while it is important to ensure processes are carried out as stipulated by the FATF, Malta’s ease of doing business should remain a top priority for the sector.
In a panel session, Geraldine Spiteri Lucas (MBR) and Stephen Attard (Ganado Associates) shared developments at the Malta Business Registry, offering an example of improving operational efficiency that reflects the revitalised mindset of all industry practitioners towards creating a more efficient, sustainable future for the sector.