The Accountant – Issue 3 of 2021 (MIA Publication)
I would like to start my last address to you, as your Institute’s President, by focusing specifically on our profession’s role in the jurisdiction’s progress in addressing findings emanating from the FATF’s assessment.
I would like to convey three key messages in respect of which the Institute expects its members to elevate standards and enhance efforts. Two of these thematic areas reflect specific FATF observations.
1. Content of websites and promotional material of accountants and accountancy firms
The Institute has been informed by local authorities, involved in the FATF process, that a number of accountants and accountancy firms promote Malta as a tax haven and give a lot of prominence to tax advantages (and very little else) of locating business in Malta within their websites and their promotional material. We have been categorically told that this does not really help the manner in which the jurisdiction is viewed by other countries’ delegations. We strongly urge all firms and practitioners to review the contents of their websites and promotional material to take cognisance of this feedback. Clearly, our market should be promoted for a number of reasons and for diverse attributes, of which we should be proud.
The taxation facet is only one such consideration, and there are other factors which should be attributed much more importance. We need to keep front of mind the fact that the content of our websites and promotional material is also assessed by international stakeholders and that this significantly influences the manner in which our jurisdiction is considered and assessed.2. Accuracy of the Register of Beneficial Owners
We strongly recommend that all the Institute’s members that are involved in the provision of Company Service Provider (CSP) services devote a significant portion of their time in the coming weeks in the implementation of a verification programme in respect of the details of, and information attributable to, Beneficial Owners (BOs) of the clients of the respective CSP practice. This programme should be carried out by reference to refreshed evidence and updated documentation, with the ultimate objective of comparing the resulting information with the data currently within the Register held by the Malta Business Registry. We strongly urge our members to update the information within the Register should any amendments or differences be noted.
Additionally, all members of the Institute that provide services, other than CSP related services, to clients of their practices, should refresh the information referred to above in respect of the BOs of their clients as part of the periodic client re-assessment process. Once again, this should be carried out by reference to independent sources of evidence and documentation rather than information currently reflected within the Register. We strongly recommend that the refreshed information is compared to the current data within the Register. We re-iterate that our profession is subjected to a legal obligation to report to the Registry on an immediate basis, should there be any discrepancies noted. Whilst the above recommendation contemplates the application of a programme in respect of all clients of accountancy practices, we recommend that focus is primarily placed on entities ultimately owned or controlled by foreign persons or entities, on a risk basis, taking into account risks attributable to specific jurisdictions constituting the nationality of the foreign beneficial owners.
3. Tax evasion
As a profession, we should at all costs steer clear of any attempts by clients or parties to evade income taxes. The Institute demands this out of its members and expects zero tolerance by warrant holders. With respect to local businesses and entities, we do hope that the days of accountants being involved in maintaining multiple versions of accounting records for clients or employers are over. We also augur that the involvement of accountants in the under-declaration or non-declaration of revenue for income tax purposes, which seem to occur systematically within local specific economic sectors, is non-existent. We strongly re-iterate that our profession should distance itself from any attempts by local players, no matter who these players are, to divert income or gains to overseas jurisdictions in attempts to evade taxes.
In relation to wealth, assets or funds allocated to entities incorporated in Malta by foreign beneficial owners, we strongly urge all members of the Institute servicing such entities to exercise vigilance and rigorousness in client onboarding and monitoring processes in respect of such clients.
In this manner we expect our members to be in a position to detect, as much as is reasonable taking into account the circumstances, whether such beneficial owners would not have committed tax evasion in connection with the assets or wealth referred to above transferred to Maltese incorporated entities. The perception around the jurisdiction’s and the gatekeepers’ success in combating tax evasion by foreign beneficial owners utilising local corporate vehicles is definitely one of the reasons why the jurisdiction has been adversely graded through the FATF’s evaluation process. Our profession must be at the forefront of ring-fencing and defending our jurisdiction.
Changing tack and subject matter. The Institute’s strategy for the past few years has centred around five pillars highlighted below. We have strived to forward our Institute’s programme in relation to these thematic areas and I have provided regular updates on our initiatives in this regard. I would like to synthesise the next strategic steps within each pillar to ensure the continued enhancement of the Institute’s strategic efforts going forward.
a) MIA as a home to all qualified professional accountants
The Institute’s key priority remains that of attributing importance to the wide membership base, comprising accountants in business, sole practitioners in public practice, members of small and medium sized practices, together with partners and employees of larger firms. Every single member is fundamental and in my view our stance in the past few years demonstrates this. This objective was particularly relevant to me as President in view of my background and considering the higher proportionate impact of the recent regulatory and compliance changes within our profession on small and medium sized practitioners. The small and medium sized practitioners’ community is at the heart of all major initiatives at the Institute and we will need to continue working closely with them to ensure their concerns and issues are an integral and intrinsic part of the Institute’s strategic efforts.
We have instituted a programme for the purposes of including expatriate accountants working in Malta within the Institute. So far we haven’t manage to attain critical mass in respect of numbers under this outreach programme but I am sure that we will continue working relentlessly to attract all members of the profession to the Institute. As with all major initiatives, the support and advocacy of the firms in our marketplace will be fundamental.
b) Elevating quality and raising standards within our profession
Taking cognisance of the current circumstances within our profession, the Institute had to allocate a significant amount of effort and time in respect of professional misconduct cases and other disciplinary matters. We have investigated and taken robust action, if deemed necessary, in respect of every single complaint received and matter highlighted to us, and in respect of every member mentioned in the press, in court proceedings or in other procedures. We believe this is unavoidable to restore our image and credibility as a profession.
We have been instrumental in providing feedback on, and shaping, to the extent practicable, changes to the regulatory and compliance requirements in respect of the profession, which were deemed necessary in view of the current jurisdiction’s standing. Our strategic efforts in this area will continue in a sustained manner in the coming months.
The Institute’s key objective going forward remains securing the execution of the proposed reform of the profession’s regulatory infrastructure and regulatory body. We have proposed major enhancements to the regulatory framework so that the profession is regulated in a more effective manner and that only professional warranted accountants are allowed to operate as such. The Institute will continue to demand the required modifications as an intrinsic part of the restoration of the profession’s image.
c) Enhancing the education and qualification process
We have invested in a significant manner in these areas as they are fundamental to the Institute’s strategic objectives to increase the quantity and quality of students selecting accountancy and related subjects for education and qualification purposes. Increasing the supply of quality professional accountants will remain one of the MIA’s priorities. We have recently launched a landmark education campaign targeting 12 and 15 year old children, to educate these children on the attractiveness of our profession and other topics related to accountancy. This campaign will involve further steps over the medium and long term, as the effort constitutes continuous investment over a number of years to reap dividends in future.
We have set up workstreams with the University and ACCA to enhance the respective tuition and qualification routes; our efforts in this segment are still work in progress. Our activities within the domain of education and qualification will escalate over the coming months and once again the support of the firms in the market will be key to the Institute.
d) Fostering collegiality and comradeship among accountants
As a response to all the challenges and issues that we have experienced as a profession within the past few months, we embraced the principle that by working as one profession with one front we have a better chance of delivering effective change and solutions to the actual issues at hand. COVID-19, greylisting and related reputational matters, significant resourcing constraints, obstacles in relation to relocation of expatriate accountants to Malta, and many other matters have been tackled by the Institute taking into account the interests of the wider membership base. The MIA continues to work with the authorities and provide recommendations in respect of the relocation process of expatriate accountants. We have focused on the needs and objectives of all the different pockets and sectors within our profession. The MIA’s activities in the future will continue to address these prevailing circumstances.
e) Striving to make the Institute’s voice heard, loud and clear
I am really pleased and proud of the fact that the Institute’s feedback and views are sought and considered by the major stakeholders in the marketplace. Our voice is considered reliable, relevant and constructive. Our credibility has been attained through our incessant work with respect to formulation of feedback to formal and informal consultations carried out by all relevant regulatory authorities. We have also directly approached the authorities with our views on many matters and we have engaged in debates with several ministries on different issues impacting the profession. We have been very direct and incisive. Expect your Institute to continue investing in this approach and to continue operating with this style.
Like everything else in life, my term as your President has come to an end. For the past two years and three months, I have done my very best every single day to work hard for the Institute, for the profession and for you as members. It has been such an honour leading the Institute and leading a powerful army of more than 3,500 members. This experience has rendered me a better human being and a better professional accountant. I wanted this experience, but it turned out to be more inspiring and defining than expected. The Institute is alive, vibrant, ambitious and dynamic. It’s not an easy entity – to work within it and contribute to it one has to want it with passion. The MIA is a sensitive, courageous and determined entity – a reflection of the characteristics of our profession and our members. We are extremely lucky to form part of this profession and the Institute. My last words will be the same ones I used at the commencement of my term. Strength. Resilience. Pride.