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PN, AD express fears over new permanent residence scheme
Nationalist Party and Alternattiva Demokratika warn against abuse and spiraling property prices following launch of Global Residence Programme.
4 June 2013, 12:00am
Jurgen Balzan
Jurgen Balzan
3 min read
Opposition MP Tonio Fenech has warned that the lack of deterrents in the newly launched Global Residence Programme could lead to abuse and become a burden on the Maltese taxpayer.
The former finance minister called for the government to include deterrents that ensure that foreigners, especially non-EU citizens, who chose Malta as a retirement destination do not abuse of the scheme and of public services.
He explained that the new programme would be granting foreigners who purchase property in Malta immediate residence, and grant non-EU nationals the same rights enjoyed by Maltese and EU citizens.
"I ask what kind of deterrent will be in place. The previous government had introduced the €500,000 deposit as a deterrent against persons seeking a Maltese residence permit to take advantage of the services offered by the Maltese state," Fenech said, referring to a case in which a non-EU national had availed himself of free public hospital coverage.
The government's new scheme reduces the thresholds for the purchase of immovable property in Malta for foreigners who wish to buy property in Malta.
A former scheme - the Permanent Residence Scheme - was suspended by the PN administration and replaced by the High Net Worth Individuals (HNWI) Scheme in 2011. However, the HNWI did not prove popular because the minimum value of purchased property had been raised from €116,000 to €400,000.
Under the Global Residence Programme launched last week, the value of immovable property bought in Malta by foreigners has to be at least €275,000, while the minimum value for property is in the south of Malta or in Gozo was reduced to €220,000. The tax threshold was also lowered to €15,000. The bond amount of the previous scheme amounting to €500,000 was also removed.
While reiterating that the Opposition has no objection to the new scheme, Fenech stressed the importance of having certain constrains which would act as a deterrent against abuse.
"The biggest question mark is how the government intends to guarantee that no abuse takes place. Although there seems to be an agreement on the need to introduce the necessary safeguards to mitigate the risks," Fenech said.
He explained that an influx of non-EU residents paying just €15,000 in tax could result in the local tax payer unfairly sharing the burden of social services including health care.
Meanwhile, Alternattiva Demokratika secretary-general Ralph Cassar argued that the scheme must be geared towards the encouragement of the utilisation of the more than 70,000 vacant properties.
"We hope it will not be used as an excuse for more development. Depending on the property sector as a means of economic growth will backfire big time. Just look at what happened in Spain and Cyprus," Cassar said.
Although the parliamentary secretary for economic growth Edward Zammit Lewis believes that the programme will not lead to an increase in property prices, Cassar said that the scheme could price out Maltese persons from the market.
Cassar noted that the government "must be careful that this scheme doesn't end up in spiralling property prices in our village centres, pricing property out of the reach of the normal Maltese wage earner and driving out lower income residents."
He added that the previous PN administration left behind a legacy of overdevelopment which turned settled neighborhoods into "building sites" while making no effort to introduce open urban areas and proper infrastructure for pedestrians.
"Just look at the intense building spree in Attard, Swieqi, Sliema, Mosta, and Mellieha amongst other places. In one area in Attard, for example, they did not even plan for proper, wide pavements and open spaces. This PL government's attitude doesn't seem to be any different, with hotels being given the go ahead for additional storeys and it's talk about land reclamation without a policy in place. I suppose both PL and PN owe quite a lot to the speculator's lobby," he said.
Jurgen Balzan was a MaltaToday reported from 2011 to 2017.
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Let me provide the viewpoint of a lawyer who represents the type of HNW clients that Malta would like to attract:
-If you set up proper screening procedures, you can weed out criminals. It is not only the locals who would not want to see criminals, it is also my clients who do not want to move to a place which attracts these types of people;
-If you set the investment amount and annual tax payment at the right level, then you don't have to worry about people coming for free government services. Logically who would spend this amount of money in order to have a claim for services which they could by outright at a fraction of the cost;
-By opting for a residence rather than a citizenship program, Malta has chosen to enter into a highly crowded competitive field. I have personally been to Malta several times and enjoyed it. However, what competitive advantage does having Maltese residence under this program have? Sunny climate? This can be had in Spain or Portugal at the same price. Low Taxes? There are a number of other EU destinations where with minimal pre-immigration planning, my clients could have a lower annual tax bill;
-Bottom-line: If Malta offers citizenship and not residence, it would be entering a much less crowded field of competitors and could reap a much larger per family revenue directly to the government which could be used to the direct benefit of the entire Maltese community rather than just developers. Many of these applicants would also buy homes which would help the developers in the long run.
-Keys to success would be to have
1) High quality screening of applicants; and
2) Government fee going directly to a visible destination which all Maltese could appreciate helps their community (e.g. hospital, schools, debt reduction);
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Is this the movement of progressives? Where is the social conscience of the Labour Party? If you are well heeled and buy a property here we will give you a residence permit which allows you to work and travel all over Europe. However if you are penniless and desperate looking for human dignity you are sent into a detention camp. Our humanity depends on how deep are your pockets!!
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Here is a warning to all non-EU nationals looking to take up Malta's reintroduction of its permanent residence scheme.
You need to question the high-handed manner in which the previous scheme was suspended by the then Nationalist government.
You need to ask yourself what is stopping them returning to power in the next election and reversing the Labour government's new initiative. The National Party acted retrospectively when it was in power then: It can do so again.
More especially, you need to ask yourself what is Malta doing for you - apart from looking to you to kickstart its ailing economy?
You don't have to look far for a better destination. I found Italy and am loving it.
"Once bitten, twice shy South African"
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There is very little to criticize of the new scheme. The former PN Minster for Finance should remember well the consequences of his inaction when the first scheme was suspended by his Ministry. For over a year international buyers shunned Malta and invested their money elsewhere. When his new scheme was launched it was a complete non starter. One had to be mad to even attempt to meet the criteria it set. As a consequence the decline initiated by his Ministry was further compounded with the introduction of a badly planned scheme. The current scheme has safeguards in it that are designed to protect the Maltese taxpayers from having their health system abused. Cleverly though it does not make it impossible for people to buy here so hopefully it will work. Non EU Nationals will be required to have health insurance therefore they should not pose a burden on our national resources. EU Citizens have full rights to our health service under the EHIC scheme as we have full rights in other EU countries. In the case of comments made by AD, these , unsurprisingly are unfounded. In the first instance very very few foreign investors look at inland Malta for their properties so any over development in Attard , Swieqi , Mosta etc is a consequence of strong demand from the local Maltese population. The foreign market is predominantly in St Julians , Sliema and Ta' Xbiex. As with all development there are two very important factors to keep in mind. The banks in Malta are very cautious and will not finance projects unless they are convinced of their feasibility. At least that is the principle the local banks have been following since at least late 2007. With regards to planning we have MEPA which is the regulator and therefore any development that takes place does so with the consent of the Authority. The fundamental point remains that investment in the property market by foreigners is a vital component of our economic success and crucially important to the well being of the Maltese economy. The present administration in their first 100 days are showing us that they meant what they said when they declared themselves pro business. Long may it last and may the fruit of their endeavour result in more economic activity , more jobs, a lower Government deficit and maybe one day, lower national debt. At least our new leaders are not living in cloud cuckoo land , they are very aware of the importance of the business community.
