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Estate agents criticise property tax
The first Vodafone Update Seminar was held at the SAS Radisson Baypoint St Julians, on 17 March 2006. Hon Tonio Fenech, Parliamentary Secretary in the Ministry of Finance and Hon Charles Mangion, Opposition Spokesman on Economic Affairs discussed the new tax on property sales with estate agents, developers and the general public.
Mr Fenech explained what the Government is trying to achieve with the new tax. "It was designed to encourage people with hoarded property - property that has been long held - back on to the market again."
The 12% withholding tax on the sales price means that a lot less tax would be paid on properties which have been held for 20 years or more than under the 35% capital gains regime.
Mr Fenech said that, to avoid problems highlighted by estate agents and others when the measure was first announced, a five-year window starting on the date the property is bought has been introduced, during which there is a choice of taxation methods. There are also a series of opt outs and exemptions, and property sales which were previously exempt from capital gains tax remain exempt from the new sales tax.
"Intergroup transfers are also left out," Mr Fenech told the delegates at the seminar. "The measure has had a positive effect on the property market," he maintained.
Mr Mangion reaffirmed that the aim of the tax is to encourage people to put more property on the market, with the sub-text that this should moderate the steep property price increases of recent years. He asked, however, if the new regime would create two categories of taxpayer.
Mr Mangion told the seminar that one problem with the sales tax is that losses on sale of property by a company cannot offset profits. "This is a new system of taxation," he said.
In the animated open discussion following the presentations, Steve McCarthy, CEO of JP Brothers Ltd, a property developer, Douglas Salt, President of the Federation of Estate Agents and Frank Salt, among others criticized aspects of the 12% sales tax.
Douglas Salt told the speakers that the industry's initial reaction was "total disbelief". "The changes made are a definite improvement," he added. "I cannot understand why there is a five year window. The option to choose the tax system should be extended across the board, without any time restriction."
Frank Salt told the seminar that the five year window is unfair. Sellers cannot choose a when their property gets sold: once a decision has been made to sell, it is impossible to know how long it will take to actually find a buyer. "With the system as it is at the moment, someone who manages to sell a property five years and one day after buying will pay considerably more tax than someone who sells one day before the five years are up," he pointed out.
This is the extreme position, but it does illustrate the problems with the new tax system. "This is a very unfair system," Mr Salt concluded.
The Vodafone Update Seminars are sponsored by Vodafone Malta and supported by the SAS Radisson Hotels and Resorts and Progress Press.
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17 March 2006
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| 12:30 |
Registration |
| 13:00 |
Lunch
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| 14:15 |
Opening - Chris Grech, Dhalia
Our Moderator for this afternoon's Forum.
Chris Grech started Dhalia Real Estate in 1983 after finishing his graduate studies in the United States. In 1986 Dhalia Developments was formed as the investments arm of the property gossip. Today Dhalia Group boasts of 15 real estate offices in Malta and Gozo, a Brussels office as well as offices in Sofia, Bulgaria. The Group also holds a stake in the investments and developments part of the business.
Chris Grech served as chairman of St James Cavalier for a three-year term, and is a director and shareholder of Bay Street Tourist Complex. He is Business Development Director to the Dhalia Group.
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| 14:30 |
First address - Hon Tonio Fenech
Tonio Fenech's political career started in March 1997 with the Nationalist Party, after being elected Councillor on the Birkirkara Local Council Election. In October 1998, he was elected Mayor, but in April 2003, he resigned on being elected to Parliament. He was appointed by Government as Observer to the European Parliament, and in March 2004, Tonio Fenech was appointed Parliamentary Secretary in the Ministry of Finance by Prime Minister and Minister of Finance Dr. Lawrence Gonzi.
Within the Nationalist Party, Tonio Fenech was elected as a Member of the Executive of the Nationalist Party College of Councillors, in April 1998, and in April 1999 he was appointed Secretary General to the same College. Tonio Fenech has also held a number of political appointments, including Member of the Housing Authority Board from October 1998 to April 2003, and Member of the e-Malta Commission from April 2001 to April 2003.
Tonio Fenech graduated from the University of Malta with a B.A. Honours degree in accountancy. He joined Pricewaterhouse in 1993, serving within the Audit and Business Advisory services division for five years. Prior to his appointment to public office, Tonio Fenech was a Senior Management Consultant with PricewaterhouseCoopers. He is a Fellow of the Institute of Accountants and a public practice warrant holder. Tonio Fenech is married to Claudine neè Ellul, and has two children.
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| 14:50 |
Second address - Hon Charles Mangion
Charles Mangion is the Opposition Spokesperson for Economy and Finance, a post he has held since 2003. He was Labour Minister for Justice and Local Government during the period 1996 and 1998. Prior to this, he was Shadow Minister for the Interior between 1992-1994, and Shadow Minister for Industry and Local Government between 1994- 1996. In 1992, Charles Mangion was chosen as Deputy Speaker of the House, by unanimous vote in Parliament. He was first elected to Parliament in 1987 for the Malta Labour Party, and has been re-elected ever since.
Charles Mangion practices as a solicitor in Malta, having graduated from the University of Malta, first in 1974 with a B.A. Honours degree, and then with his second degree, as Doctor of laws, in 1982. He is married to Carmen nee Schembri, and has three children.
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| 15:10 |
Discussion |
| 15:50 |
Recapitulation - Chris Grech |
| 16:00 |
Close |
Downloads
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Property feature
In November and December 2005, the Malta Economic Update spoke to a number of estate agents, property developers and property owners about the withholding tax. This is what they had to say.
Download this document
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Property transfers Q&A
The Inland Revenue Department has prepared a document answering questions about the propert tax, in Maltese.
Download this document
Event Images
Tonio Fenech considers his answer
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The panel: Tonio Fenech, Chris Grech and Charles Mangion
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