Minister confronts developers, estate agents on permanent residency scheme

Speaking during a business breakfast organised by a number of bodies involved in the construction and property industry, finance minister Tonio Fenech said that he was “surprised” at the reaction over the new rules that reviewed the Permanent Residency Scheme.

Faced by complaints – including by former Nationalist parliamentary secretary Tony Abela -  over a €500,000 bond to be deposited by applicants for the scheme, Tonio Fenech said that contrary to what was being said, there was absolutely no obligation for anybody to take up the scheme or to deposit the bond.

“The bond is there to attract foreigners of goodwill and not somebody who just comes here to simply acquire rights which will eventually be funded by Maltese taxpayers,” Fenech said, adding that as things were before, a foreigner would come to Malta, pay minimum tax, would not engage in economic activity, but would be entitled to all benefits as much as Maltese taxpayers.

“The difference here is that we must distinguish fact from reality. We note that only 132 properties have been sold under the scheme in three years, while hundreds of other bona fide investors who are engaged in the financial services, the remote gaming industry and others, have bought or rented properties which have earned developers and estate agents millions of euros, while none of them became a burden on the Maltese state,” Fenech said.

He added that it was absolutely untrue that the €500,000 bond was obligatory, and that if the applicant was wise enough, there was no need for the bond, as the applicant would live for four years, leave for six months and return to re-start the scheme.

Fenech was surprised at the use of Cyrpus as an exemplar of permanent residence schemes, Fenech pointed out that Cyprus is not a Schengen country.

“We have an added benefit for those who chose the scheme, and you are telling me that you are not capable of selling Malta for what it offers?” Fenech asked. He remarked that government would prefer to have active foreigners who would engage in economic activity and continue to generate revenue for the country.

He said that government was encouraged by the fact that the Malta Financial Services Authority (MFSA) is engaged with a number of interested parties who are keen to take up a new scheme intended to attract fund managers, through which they would benefit from a 15% income tax scheme.

“This is the kind of scheme government really supports, because it is truly high end, and the ripple effects on the economy are huge,” Fenech said.

He stressed that contrary to the perception, government does not look at the construction industry less than others: “we look at the national interest, and I would be irresponsible if I had to simply look at a part of the picture rather than the wider reality of the Maltese economy,” Fenech said, adding that

“In a nutshell, as it was the Permanent Residency Scheme was so convenient that if one looked at it in a way, even I would be attracted to it, with just Lm4,000 as a net base” the Minister said, as he asked what kind of high net earning individuals does the country want to attract if things were left as they were.

He argued that Malta cannot afford to be considered as a tax haven, and this was neither in the interest of any economic sector, because the benefits are short-lived under today’s realities worldwide.

During his intervention, Tonio Fenech agreed on the need for another revision to the rent law to ensure that owners who rent from Maltese can be justly safeguarded against defaulting tenants, and expressed agreement to look into schemes that would incentivise people from buying or renting empty properties, especially in village cores.

He argued with developers to respond to the realities of today’s markets and to be considerate of the fact that many of their properties will remain unsold because they are too small for Maltese demand.

Tonio Fenech was also interested to look ahead in expanding public partnership schemes for infrastructural projects and expressed his willingness to discuss projects with sustainability and viability in mind.

He also announced his intention to change the way government architects value properties when inspecting property sales. At one point he challenged Labour MP Karmenu Vella to tell him who his building inspector was, when the MP remarked that the high value given to his property estimate was only "to avoid his [the architect's] sacking".

“Tell me who this architect was, because this is not our policy,” Fenech told Vella.