MALTA: Crypto exchange Binance’s Maltese tax arrears ‘covered by official secrecy’

The Maltese government refuses to publish information on the unpaid tax dues of Binance, the cryptocurrency exchange company whose founder pled guilty to violating anti-money laundering rules in the US last year.

In response to a question by opposition Nationalist Party MP Jerome Caruana Cilia, Finance Minister Clyde Caruana claimed information on the tax arrears could not be given as it is “covered by official secrecy.”

Last year, it was revealed that the company, set up in Malta in 2018 amid disgraced former prime minister Joseph Muscat’s ‘Blockchain Island’ craze, never paid a cent in Maltese taxes.

Despite processing billions of euro through its online exchange during its year-and-a-half sojourn on the island, Binance’s main company in Malta reported losses every year, sidestepping obligations to pay taxes to the Commissioner of Inland Revenue.

Binance’s former CEO, Chanpeng ‘CZ’ Zhao, pled guilty to money laundering offences, resigned, and agreed to pay more than $4.3 billion to settle a case with the US Treasury Department in November last year.

The company, whose former CEO’s address remains registered in Sliema, Malta, is accused of operating as an unregistered securities exchange, violating US securities laws, and failing to meet anti-money laundering obligations, amongst other offences.

In response to Caruana Cilia’s parliamentary question, asking for the tax liabilities incurred by Binance, Caruana claimed the information cannot be given since it is covered by official secrecy, referencing Article 4 of the Income Tax Management Act as justification.

The referenced law stipulates that “every person having any official duty or being employed in the administration of the Income Tax Acts shall regard and deal with all documents, information…as secret and confidential,” except if directed otherwise by the Tax Commissioner.

Tax Commissioner Joe Caruana has been criticised for his inaction on high-profile tax-related issues, including a failure to investigate after questions were raised over Prime Minister Robert Abela’s two-tumolo property in Żejtun.

Responding to separate parliamentary questions posed by Caruana Cilia, both Abela and Caruana denied ever meeting Zhao and refused to provide details on any meetings between the former Binance CEO and other government officials.

Binance was based in Malta for 18 months from 2018 to 2019, taking advantage of a “transitory” grace period ahead of the government’s introduction of anti-money laundering, consumer protection, and anti-market manipulation legislation.

During the “transitory period,” the Maltese government incentivised and attracted crypto and blockchain companies as part of its Blockchain Island project. Once the legislation came into force, most of the companies left, along with their profits.