Property tax exemption only temporary, Finance Ministry insists

The controversial exemption on property tax is only a temporary measure designed to ease the burden on cash-strapped businesses, the Finance Ministry has clarified.

The exemption is detailed in Legal Notice 419 of 2021, published earlier this month, and states that those who have tax arrears that were due by January 2021 will be allowed to pay any tax due on the transfer of property purchased before March 2021 against their arrears, and thereby be exempt from tax on property transfers to the extent that they are in arrears.

The measure attracted widespread criticism from various industry stakeholders. The Malta Chamber argued that companies that pay their taxes on time are being discriminated against; the Malta Developers Association distanced itself from claims the measure was a tax break for developers, while the Malta Insitute of Accounts, the Malta Institute of Taxation and the Institute of Finacial Services Practitioners separately said the amnesty went against Malta’s efforts to be removed from the FATF grey list.

Replying to questions by Businessnow.mt, a ministry spokesperson said the measure was only valid until the end of 2022, and was meant as a one-time opportunity.

"The measure was proposed on 21st March by the Ministry for Finance and endorsed by Cabinet as one of a series of measures to ease the burden on cash-strapped businesses during the pandemic. It also aimed to increase Government’s revenues," the spokesperson said.

Despite the wave of criticism, the Ministry insisted there was no negative feedback by any stakeholders about the proposal during various outreach initiatives.

"It also 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.

"In fact, the scheme is limited to revenues generated from assets equivalent to the value of tax arrears due."

The Ministry said the Government was committed to strengthening its efforts related to tax collection, echoing Finance Minister Clyde Caruana's crusade against tax evasion.

Meanwhile, the Nationalist Party called for the notice to be repealed, stating the measure was a blow to all those who had paid all due tax, while rewarding those who abused the system.

Independent candidate Arnold Cassola went a step further, claiming the measure was a stealthy form of state aid to the two main parties, allowing them to palm off a portion of their hefty tax arrears.