JAMES DEBONO explores how the fate of the pristine Comino environment could depend on the whims of a company registered in another small island known for its status as an offshore tax haven
Kemmuna Ltd, the company running the hotel and bungalows on the pristine island of Comino, has taken a big capital injection of several millions of euros in a move which has observers watching closely, as changes on Comino could be under way.
The move comes after leading entrepreneurs Joseph Gasan and George Fenech acquired Ropes Services Ltd in November 2007, a company registered in the Isle of Man, the small crown dependency off the British coast, which enjoys the reputation of tax haven.
Ropes Services then proceeded to acquire a shareholding in Kemmuna Ltd, the company that owns the Comino Hotel and the Santa Marija bungalows.
Ropes Services now owns 551,470 ordinary shares, with the remaining 698,530 belonging to Mizzi Associated Enterprises Group, the company owned by property magnate Albert Mizzi.
Ropes Services’ latest annual return lists four Maltese directors – George Fenech, Raymond Fenech, Joseph Gasan and Mark Gasan – which followed the resignation of Britons Christopher Peter Eaton and Karen Lesley Jones from the post of directors on 15 November 2007.
That same day, the shares belonging to Oaklawn Ltd and Penleigh Ltd, two companies operating in the British Virgin Islands which previously owned Ropes Services, were transferred to Ta’ Monita Estates Limited: the company owned by Joseph Gasan and George Fenech involved in the construction of an apartment block in Marsascala.
And as Fenech and Gasan were taking over the company in the Isle of Man, Lombard Bank – a shareholder in Kemmuna Ltd – also sold its shares to Hili Investments Ltd, which immediately sold their shares to Ropes Services.
And this was followed by an increase of the company’s authorised share capital, which now amounts to €3.4 million.
Lombard Bank director Joseph Said, recently appointed chairman of Heritage Malta, gave up his directorship in Kemmuna Ltd, together with entrepreneur Alec Mizzi – son of Albert Mizzi – to be replaced by Gasan and Fenech.
In March 2008, Ropes Services applied to the Isle of Man’s financial supervision commission to transfer the domicile of the company to Malta.
Last May, a new memorandum of association was signed by Albert Mizzi and Maurice Mizzi on behalf of Mizzi Associated Enterprises, and Joseph Gasan and George Fenech on behalf of Ropes Services.
One of the new objectives of the company is “to own, manage or administer the charter of yachts, boats and other vessels” and “to engage in property development” and to “demolish, construct and finish buildings whether of a residential or commercial nature.”
The local plan
Observers know that the Gozo and Comino Local Plan – the environmental policy that guides the planning authority (MEPA) into how it considers development applications – allows Kemmuna Ltd to “upgrade” the existing tourist complex and hotel if it is “compatible with the sensitivity of the surrounding context.”
That means that the local plan does not expressively ban new development, even if the “main thrust of upgrading should be directed towards the rehabilitation of the existing product and the redevelopment of the current facilities.”
The local plan also earmarks San Niklaw and the Blue Lagoon bay areas as a possible site for a “destination port” – the euphemism used for a fully-blown yacht marina – alongside Marsalforn and Hondoq ir-Rummien in Gozo.
The marina would become a landing point for the provision of necessary services such as onshore toilet facilities or garbage disposal for yachts, and also prohibit the anchoring of individual boats around the island.
Intrigue in Comino
Over the past decades, Comino has seen its owners change a number of times.
In 1926 the island was leased to the Zammit Cutajar family who formed the Comino Farming Company. The lease was relinquished in 1960, when the government granted the island to Comino Development Co. Ltd, a company owned by British millionaire John Gaul, for a term of 150 years.
Some years later, the government negotiated a new deal with Gaul and the area on lease was reduced to that which is at present occupied by the Comino Hotel at San Niklaw Bay and the bungalows at Santa Marija Bay.
Subsequently, John Gaul’s then ex-wife sold the hotel to entrepreneurs Cecil and Henry Pace. When their BICAL group of companies was transferred to the Central Bank controller Karmenu Mifsud Bonnici, the demise of the Pace’s empire would prove fruitful for the businessman who ended up partitioning it amongst them.
Pace had invested Lm400,000 in the Comino Hotel, which carried an emphytheusis for 150 years at Lm12,000 a year. When the BICAL group went under the controllership, the hotel was valued at over Lm1.5 million.
In a bizarre move, Mifsud Bonnici disposed of the Lm12,000 annual rent by giving the Comino Hotel to landlord John Gaul, for free.
Removing the hotel without any form of recompense, Mifsud Bonnici lost an investment of hundreds of thousands of liri and the rest of the hotel’s potential.
No novice at making profits, John Gaul disposed of the hotel some weeks later for the price of Lm2 million and Lm50,000 rent a year.
Eventually, the company was to become part of Albert Mizzi’s empire. To his credit Mizzi made no attempt to develop the island during the next two decades.
Yet this could change with the approval of the new local plan. The land leased to private interests in Comino covers 28,198 square metres for a rent that amounts to €11,767.99 per annum.
The Isle of Man tax haven
The Isle of Man is not a part of the UK, but a crown dependency with a minute population of 75,000. It has its own language, Gaelic Manx, boasts spuds and herring as its national dish, and also has the oldest parliament on earth, the Tynwald, which is entirely composed of independents.
But its greatest claim to fame, or notoriety, is for being a tax haven.
Residents are taxed just 10% on their worldwide income for roughly the next £10,000 after the free pay threshold is reached, and 18% thereafter. But the maximum tax payable by an individual is £100,000 or £200,000 for couples if they choose to have their incomes jointly assessed. The £100,000 tax cap equates to an assessable income of approximately £570,000.
If you are married and your husband or wife does not work, you get double the free pay allowance.
There is no capital transfer tax, no corporation tax, no wealth tax, no death duty, no capital gains tax and no gift tax.
In 1998 it earned a place alongside Jersey and Guernsey in the OECD’s black books. But following the 9-11 attacks, the island started to clean up its act.
After the EU agreed to a mixed information-sharing and withholding tax regime under its Savings Tax Directive in early 2003, the Isle of Man decided, along with Jersey and Guernsey, to apply a withholding tax to the returns on personal savings.
Despite the removal of the special tax exempt status for international companies in 2006, the 0% general corporate tax rate ensures that very similar results can now be achieved by using resident companies with non-Island beneficial owners.
That means an international company pays tax at an agreed rate of up to 10%, subject to a fixed minimum threshold.