It’s not uncommon for the very wealthy in any country to gather their skirts in a huff during periods of fiscal policy upheaval and threaten to go where they’re appreciated.
But at a time when the practice of economic immigration – citizenship in exchange for investment – has never been more popular, it has just received a severe legal knock.
The Court of Justice of the European Union has ruled Malta’s “golden passport” system illegal, a decision not only binding on the EU’s smallest member, but one which throws several other countries’ citizenship rules into doubt.
The EU has long disapproved of its members seeking investment-luring advantages using low taxes and citizenship as bait, so for it, the Malta decision is a handy discipline rod.
The court ruled it was illegal for a nation to effectively sell citizenship as a financial transaction, holding the now-common practice of counting an applicant’s new domestic investment toward the granting or acceleration of citizenship to be an illicit transaction.
Several other European countries, including Hungary Italy, Portugal and Greece, will now also have to review their investment-favouring passport rules.
The ruling may also confound capital flight ambitions outside the EU, should other courts have occasion to review the legal principles and concur with the European court.
There’s a well-publicised new trend for Americans to abandon the United States in dismay at the Trump administration, and some wealthy folk are also noisily leaving Britain as its government makes controversial fiscal changes.
Many countries, including New Zealand, offer accelerated residency and citizenship to those who agree to inject prescribed amounts into their economies in approved ways and for a regulation number of years. Although this can grate with the non-wealthy – as in the case of New Zealand’s most famous absentee citizen, tech billionaire Peter Thiel – the economic activity it generates is generally well tolerated.
The EU might have put up with the practice but for its surging popularity with Russian oligarchs. Few were bothered about efforts by the diminutive island state of Malta (population 563,000) to attract investment and generate job creation until Russian moneybagses took a sudden interest in becoming Maltese.
Introduced in 2013, Malta’s scheme had, by 2017, lured only NZ$1.9 million in new investment. Following the barrage of sanctions against Russia for its Ukraine invasion, this tally rose to an estimated NZ$47m. Several of the now 96 Maltese golden passporteers are Russian businesspeople listed as banned by many other countries.
Malta and potentially other European countries will view the ruling as a crimp on their sovereignty, and may argue that post-Brexit Britain, for one, continues to benefit from Russian money of shady provenance.
However, other concerns include the wealthy incomers’ boosting of housing unaffordability. Spain and Portugal have had to review house-buying obligations on citizenship applicants for that reason.
A further hitch in Malta is that a probable majority of golden passport holders remain mere visitors. They’ve acquired citizenship to gain access to the EU Schengen zone – all 29 countries– without falling foul of residency-time-related tax penalties.
Although the incomers buy or build expensive homes, many are empty most of the time, leaving some areas virtual ghost towns.
Perhaps the policy’s most haunting legacy is the 2017 car bomb assassination of Maltese journalist, Daphne Caruana Galizia. Visitors and residents alike can hardly miss the well-garlanded memorial in downtown Valetta commemorating her exposure of corruption and money laundering in Malta. Her investigations pointed to the golden passport scheme facilitating actual and potential corruption.
How simple, innocent and unmercenary were the days when New Zealand and Australia boosted its workforces last century with the humble “Ten Pound Pom” scheme.
