Labour’s withholding tax cut ‘copied’ off Nationalists

Finance Minister Tonio Fenech has brushed off Labour's recent proposal to reduce final withholding tax on property from 35% to 15%, saying the idea has been lifted off Nationalist plans for the 2013 budget.

"In the recent budget the Nationalist government envisaged a similar reduction, and linked it to several measures aimed at the regeneration of builds in urban conservation areas," Fenech said.

In the 2013 budget, government proposed that the present choice on paying capital gains tax or 12% final withholding tax be extended from seven to 12 years as from 2013.

"Labour's proposal is nothing new and that once again, Labour is trying to claim credit by simply copying our proposals and expanding them.

"They have also copied four of our proposals with regards to their own renewable energy proposals."

Fenech did not answer questions by MaltaToday over the effect this measure would have on government finances, and Joseph Muscat's own claim that reducing the tax on rented property would encourage higher declarations and greater revenue for the state coffers.

Asked to quantify the effect of Labour's proposal to reduce the final withholding tax from 35% to 15% on government's income, and whether it could mean less revenue, Muscat said the tax cut would mean incentivising the market as more properties currently standing vacant would be "freed up" for renting.

"There will be an influx of more properties into the rental market, resulting in more properties being rented out, and more tax being collected. This will mean that revenue from the withholding tax will increase, and not decrease, according to our workings," Muscat said.

On his part, Fenech said that the government had halted the permanent residence scheme so that it could be reviewed in the wake of residency abuses by some beneficiaries. "We had noticed that a number of abuses were taking place whereby individuals were gaining Maltese citizenship and access to free healthcare without paying the necessary contributions."

Muscat has pledged to review the current scheme and its onerous demands on non-domiciliary beneficiaries to pay high bonds on obtaining the special tax status.

Fenech however said the government reformed both the permanent residence scheme, as well as introduced the high net worth individuals scheme. "We remain open to having new schemes that take changes and developments into account."

Together with tourism minister Mario De Marco, Fenech toured the Milano Due hotel in Sliema, where he spoke of government's efforts in assisting hotels and other tourism operators to invest in their own services and products through the establishment of a fund that co-financed private tourism investment.

Fenech said the hotel availed itself of €1.4 million in MicroInvest funds, allowing it invest a total of €17.5 million in their operations.

He said the Malta Tourism Authority's €24 million allocation in 2008 had been increased by €12 million since then, in a bid to market the island better.

On his part, De Marco said 2012's record tourism figures were no mean feat, and that it was "important not to take Malta's success for granted... nothing happens by coincidence."