'Post box operations'

The Commonwealth Bank has reported booming profits from its "post box operations in the tax haven of Malta", with net profit jumping threefold last year from $29.1 million to $90.6 million, Richard Gluyas reports in The Australian Business:

The 2007 accounts for CommBank Europe, obtained by The Australian, also show that the lender's income tax expense increased from $2.3 million to $7.8 million - equivalent to a rate of 8.6 per cent, or well below the 35 per cent nominal rate in the Mediterranean country.

CBE's five directors said the level of new business had increased considerably since a Maltese banking licence was obtained in August 2005. "The bank's financial position is considered strong, and the directors expect that the present level of activity will be maintained over the company year," they said.

At CBA's annual meeting last month, chairman John Schubert defended the operations in Malta - which relied on other parts of the bank for key tasks such as credit assessment and employed just five people last year for a total administrative expense of $2.1 million. Mr Schubert said the country's European Union membership made it an attractive place to do business, and the bank was there for the long term. He said CBA had discussed its business in Malta with the Australian Taxation Office "from day one".

In relation to CBE's 2006 accounts, the bank has said previously that further tax is payable in Australia under the controlled foreign company rules. Rival banks have disputed CBA's strategic rationale for basing its European operations in Malta. Senior executives have noted that the country is not well-known for its deep pool of financial services experts, and argued that CBA's presence is driven by tax considerations...

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