‘Tax exile’ rules testimony to political power held by speculators

TWEET SHARE

Vince Farrugia, the director-general of the Chamber of SMEs (GRTU), is claiming the new rules for permanent residents are intended at keeping property prices from falling further by enticing tax exiles to Maltese shores on condition that they buy properties over €400,000.

“There’s a property glut in Malta and speculators hope to make a quick return by selling to foreigners because they believe foreign sales are the safety valve to hive off the more expensive properties,” Farrugia said, just a day after Finance Minister Tonio Fenech unveiled a reformed scheme for foreigners to benefit from a 15% tax rate.

“The scheme is not bad in itself but the aim is clear: government wants to halt the slide in property prices and is helping speculators keep prices from falling further,” Farrugia said.

He also said the tax rules are aimed at “rich Russians, Chinese, Iranians, Arabs and Africans” because EU ciizens cannot be tax-advantaged. “It is high time tax advantages are given to the Maltese. It’s a shame that business reps continue to promote further tax advantages to foreigners rather than Maltese taxpayers.”

The GRTU has taken a critical stance of Tonio Fenech’s amnesty for the repatriation of monies deposited abroad, arguing that some €1 billion was “laundered” into a property boom.

“Like all property booms however, the amnesty-generated boom soon came to an end,” Farrugia said. "I had strongly insisted that these funds be diverted to appropriately created bonds, whcih are socially and economically desirable investments and not flood the property market with millions in euros being laundered through the amnesty."

Under the new rules for permanent residents, tax exiles will have to purchase property of over €400,000, or rent at €20,000 per annum, a substantial jump from the former thresholds of €69,000 for property purchased, or €4,150 for property rented.

In return, they get to benefit from a 15% tax that allows them the possibility to claim double tax relief, with a minimum tax cap of €20,000.

Farrugia has in the past launched diatribes against the Malta Developers’ Association (MDA) and its vice-president Sandro Chetcuti, whom Farrugia accuses of lobbying Tonio Fenech for a tax amnesty. “The MDA does not represent people like GRTU members who buy land and develop it. The MDA represents speculators who hoard property until it is time to sell it off,” Farrugia had said.

Chetcuti had lobbied with government for an amnesty on some €233 million in undeclared income, that had been booked as ‘shareholder loans’. Government had been requested to extend its tax amnesty for company shareholders who had re-invested undeclared income back into their own firms, but the request was not accepted in the end.

Matthew Vella, a freelance journalist at MaltaToday, was formerly executive editor at Malt...

More from Matthew Vella Matthew on Twitter

Jon Sciberras •

There is always some hidden agenda, and it seems that the poor citizen scratches his head to wonder what these are. The truth is written, yes there are hundreds of millions trapped untaxed, more hundreds of millions into properties and speculators. Its a wonder the first time buyer is baffled by some of the dogs that round up the poor sheep.

duncan abela •

I wonder whether Censu Farrugia would have spoken this way if Sandro Chetcuti was still one of his buddies. I cannot see the logic that with the permanent resident wealth rules set so high, property speculators would benefit other than the few who have built luxury apartments. I indeed feel that the limits as set will lead to the striking out of Malta by middle income foreigners earners from their list of possible permanent residence options and is going to be a heavy blow for the average property developers and possibly for the institutions who lent them money. On the other hand I agree with VF that foreign residents should not be privileged in any way compared to Maltese in similar earning brackets. Otherwise we stand to gain a few rich foreigners and lose an equivalent number of Maltese especially the ones who declare revenue honestly to foreign tax havens.

•

@Chikku. You are probably one of those people so common in Malta who thinks that the world owes you something and is quite happy to take a salary making sure you give as little back as possible. Both parties have actively catered for the likes of you - get your vote and then get on with the business on making themselves rich. It would help if you had a clue on what goes on in the country and how wealth is generated - and by wealth i don't mean some bureaucratic job or government employment subsidized by taxes. If a foreign business man comes to Malta he pays 5% tax. Supposedly he is not suppose to do business in Malta. This is hogwash for two reasons. 1. In many industries, Maltese owed companies need foreign markets to survive. The local market is a waste of time. So the foreign businesses operating out of Malta have tax advantage of seven times over a maltese owed company - and this in their own country. They have further advantages related to VAT as well. 2. Many of these foreign owed companies are doing business with Maltese registered companies. This is especially the norm within gaming and yet the tax authorities turn a blind eye - and i know for a fact that they have received instructions from ministries to turn a blind eye. In most cases, these companies are the clients of legal firms associated with ministries. Malta has got into trouble with other European tax authorities on what goes on - but they have been very successful and covering up these situations and keeping it out of the local media. Media like Malta Today probably thought that no one would understand what the article was about anyways - even if they had the details. Finally - ministries are active in channeling EU funds to PN front companies - doing this on fraudulent claims and deception and hurting existing Maltese businesses in the process. Chikku - surprised at 20,000 tax? Grow a brain before you start blogging. We'll see what you do when Ponzi-PN runs out of scams and you tell me why your job should not get outsourced to China or India if what you do actually qualifies as a job.

•

Nonsense. First of all, this concerns property over EUR 400,00. Since the majority of Maltese property is valued lower than this, the scheme is hardly goiing to keep prices from falling in the property market as such. As for the statement that the foreigners are getting tax breaks and not the Maltese, I would like to see the Maltese taxpayers who are paying more than EUR 20,000 in taxes per year (for one person) and then let Vince stand up and say that these are the people he wants to protect from "discrimination".

•

You got one right Vince. Many Maltese businessmen will not invest in their country because of the discrimination and corruption. They know that they will not be treated equally and their rights will be abused.

‘Tax exile’ rules testimony to political power held by speculators – Vince Farrugia

GRTU director says permanent resident rules reveal “political power of property speculators”