Finance Minister ‘sees no reason’ to cancel controversial property exemption

Finance Minister Clyde Caruana has said he sees no reason for the cancellation of a property tax exemption that has been called out by leading business lobbies and the Opposition for being “unfair”.

In a statement made on Thursday to Times of Malta, Minister Caruana said he would welcome debate on the measure in Parliament, but stood fast by the decision to introduce it and brushed off calls for its revocation.

“I don’t see the point why I should have to cancel it, far from it,” he said.

In response to criticism by the Malta Institute of Accounts, the Malta Institute of Taxation and the Institute of Financial Services Practitioners, who said that the measure went against Malta’s efforts to be removed from the FATF grey list, the Minister said, “There were also accusations that we are trying to do something that goes against FATF, greylisting, and so on… far from it.”

Replying to questions from BusinessNow.mt earlier this week, a ministry spokesperson stressed that the measure is a temporary one valid only until the end of 2022.

The measure, which was introduced through a legal notice earlier this month, allows those with tax arrears due by January 2021 to pay any taxation due on the transfer of property purchased before March 2021 against their arrears.

The ministry said it “reflects the pragmatic approach taken by Government to support business, while at the same time safeguarding its ability to collect taxes during exceptionally illiquid and difficult circumstances, avoiding costly court proceedings including judicial sales of property by auction to recover arrears of tax due.”

It continued: “In fact, the scheme is limited to revenues generated from assets equivalent to the value of tax arrears due.”

In his comments yesterday, the Minister said that it is “a measure intended to, as much as possible, cover tax arrears. I have every intention to get as much as possible of these arrears into the government’s coffers.”

However, it has come in from heavy criticism by some of the top stakeholders in the industry.

The Malta Developers Association has disassociated itself from the exemption, which it described as “discriminatory”.

“The current measure will create unfair competition, as anyone benefiting from such an incentive will be in a position to offer his property at a better price to that of the developer,” it said.

The Malta Chamber also took issue with the measure, saying it benefits only the defaulters.

“This in itself is unfair on those employers and businesses who pay their taxes when and as due,” it said, adding that the legal notice only serves to proliferate an unlevel playing field in favour of those who are in default.

“Such practices are extremely damaging and need to be discouraged. It would be good to see schemes designed to help businesses recover their dues from defaulting unrelated parties who are heavily invested in property.”

The Nationalist Party meanwhile called for the notice to be repealed, stating the measure was a blow to all those who had paid all due tax, while rewarding those who abused the system.