24/10/22

MALTA: Woes continue with embezzlement and tax evasion scandals.

As published on euractiv.com, Monday 24 October, 2022.

The head of the Agency for European Integration and Economic Development (AEI) in Vienna has been accused of embezzling EU funds to a Malta-based private trust while Belgium speaks out over yacht tax evasion loophole.

Malta has long struggled with money laundering and financial crime in its iGaming industry, financial services sector, and even involving senior politicians and their aids. It became the first EU member state to be placed on the FATF greylist in 2021 but managed to get taken off it just one year later.

AEI, a GmbH, was started in 2003 and carries out twinning projects with EU funds. From 2017, the balance sheet increased from €580,000 to €15.5 million, which also caught the intention of the authorities.

The latest scandal, reported by The Shift News this weekend, follows raids carried out on the AEI, the Austrian Finance Ministry in the summer, and the federal police, where dozens of officials reported suspicious goings.

The AEI received funds from the European Commission, but after it came under suspicion of wrongdoing and was raided, it filed for bankruptcy. According to Krone, the Maltese tax authorities informed the Austrian authorities about a trust structure in Malta in favour of the family of the AEI chief. Further analysis suggested that EU money was being transferred to the Maltese trust.

Those under investigation are said to be the agency’s chief, who remains unnamed in the media, a federal police chief inspector, and another individual.

Following the raids, the Austrian Foreign Ministry said it was stripped of its functions due to the ongoing investigation.

Bankruptcy proceedings are now underway at the Commercial Court of Vienna.

Meanwhile, the Belgian Deputy Prime Minister and Finance Minister Vincent Van Peteghem has spoken out against Belgian nationals using Maltese letterbox companies to register their luxury yachts, lease them back to themselves, and thus save thousands in tax.

He said at least 50 Belgian nationals had used the Maltese scheme, effectively evading taxation, with more than 350 others holding letterbox companies. In total, Belgian tax authorities have opened some 54 investigations into Malta-based files.

Of the files already concluded, seven resulted in a combined tax evasion of some €4.4 million.

Malta has long been criticised for its VAT rules for maritime and aviation, which allows individuals to create a company, register the vehicle in the name of the company and lease it back to them, saving thousands, which are non-compliant with EU law. The country has even had infringement proceedings registered against it by the EU, but yet it still continues to allow the loophole.