Malta's Welcome Mat: Krugman Says It's a Tax Trap

Paul Krugman does not deal in pleasantries. The Nobel laureate and former Princeton economist called out Malta by name in a video shared this week, describing this island's "remarkable role" in the world economy — and he did not mean it as a compliment. What Krugman identified, with the blunt efficiency of someone who has spent decades watching small jurisdictions do large damage, was Malta's function as a facilitator of what he called a "downward spiral of oligarchy." A tax haven. Not a hub. Not a gateway. A haven.

The timing is awkward, because Malta's export numbers look extraordinary on the surface. The value of exports nearly doubled to €29.5 billion in 2025, a figure TradeMalta was quick to publicise. Doubled. In one year. If you do not pause at that number, you have not been paying attention long enough. An island of half a million people does not double its export value through orange groves and boat-building. The structure underneath that figure — the financial services, the intellectual property flows, the licensing arrangements that book revenue here but originate elsewhere — is precisely what Krugman is talking about. The receipt looks impressive. The transaction is worth scrutinising.

Meanwhile, Malta Airport pushed through 1.18 million passengers in July alone, with 108 flights a day on average. Italy led as the biggest source market, followed by the UK and Poland. That is a functioning economy by any short-term measure. People are arriving. Money is moving. The cranes are still up.

But scientists are not celebrating. The Chamber of Scientists, responding to the Comino trees decision — a development intervention that stripped trees from one of the last genuinely unspoiled corners of the Maltese archipelago — is now calling for a new regulatory model, one built around what they term "environmental accountability." It is a careful phrase. What it means, translated from institutional language into plain speech, is that the current model has no such accountability, and everyone involved knows it.

I have watched Malta negotiate this particular tension for four decades. The island takes the money, builds the airport, fills the hotels, books the exports, and then wonders why it no longer recognises itself in the mirror. Jonathan Mizzi wrote about exactly that disorientation in the Times of Malta — the feeling that home no longer feels like home. He says it is not beyond recovery. I want to believe him. I find it harder each time.

What Krugman understands, and what Malta's growth figures obscure, is that numbers divorced from structure are propaganda. €29.5 billion in exports and €73.70 per person in research spending — that second figure, third from the bottom in the entire European Union, tells you everything about who is building this economy and who is simply passing through it. The election is coming, and neither side has explained the gap between those two numbers in a way that holds up to ten seconds of scrutiny.