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Maltese gaming consultant Iosif Galea has been arrested in Italy, reportedly over links to companies that failed to pay VAT on offshore gambling in Germany, causing fear within the island's gambling community of further crackdowns from abroad.
It emerged over the weekend that Galea was arrested by the Italian authorities at the Brindisi Airport while on vacation on May 14, in connection with a European Arrest Warrant that was issued early last year by the German authorities.
In Germany, 19 percent VAT tax is due on any gambling winnings, whether or not an operator is licensed. It is a regulation that some observers say is not always met with compliance.
“In the past, there have always been gambling operators in Malta who have not paid VAT in Germany on the gross gaming revenue generated with German players,” explained gambling lawyer Joerg Hofmann, a partner with Heidelberg-based MELCHERS.
When German authorities issued their “last warning” to tax evading operators in Malta and Gibraltar in 2017, it was suggested in Malta that such a tax would make it impossible to turn a profit.
Galea has been wanted since last year by the German authorities for charges related to financial crimes and tax evasion, but the exact nature of the charges are not yet clear according to both local press and insiders.
According to his website, Galea markets himself as an authority on Maltese regulatory compliance and gambling law, and lists Star Casino, Playtech, Connectpay and the UK Gambling Commission, amongst many others, as his clients.
Until 2013 he was employed by Malta’s Lotteries and Gaming Authority as a compliance officer, although sources on the island say he did not hold an important role at the regulator.
Galea has travelled outside of Malta at least twice in the past year without arrest, leading to questions as to how the Maltese authorities let him slip by.
Independent green party parliament candidate Arnold Cassola wrote to the Ombudsman demanding an investigation into both police commissioner Angelo Gafa and Brandon Pisani, the police media liaison.
"When they knew that Galea was under arrest in Italy, they issued a Maltese arrest warrant for Galea, to give the impression that Galea was arrested due to their arrest warrant," Cassola claimed.
"They used the good faith of a Maltese journalist to announce the arrest warrant on 27 May. As citizens, it is owed to us that the leadership of the police protect us and not deceive us."
There is reported alarm in Malta about what his arrest could mean for the industry, but Hofmann says that there is no real reason for panic, as Galea would have likely avoided criminal proceedings if he had paid the taxes retroactively.
“This is a criminal offence. Criminal proceedings can only be avoided if the unpaid taxes are paid retro[actively] by way of an offence exempting voluntary declaration before the tax evasion was discovered by the authorities. Then the criminal liability does not apply. In practice, this has worked well in numerous cases in our experience.
“Of course, the same risk still exists today in the case of non-payment of the gambling tax on stakes, which has been in effect since 1 July 2021. Thus, there is always a latent risk of criminal prosecution for managing directors of companies if these levies are not declared and paid.”
On Sunday afternoon, the spokesman for the Nationalist Party’s Home Affairs Office Joe Giglio called the affair “disturbing and worrisome” and asked the Police Commissioner for answers.
