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Malta Opposition Party Proposes Tax On Vacant Property

by Robert Lee, Tax-News.com, London

17 September 2007


Malta's Green Party, Alternattiva Demokratika (AD), is proposing a tax on vacant property in the jurisdiction to help increase the supply of housing and relieve price pressure on the Maltese real estate market.

Slamming the present government's policies in the area of housing as "repetitive, weak and expensive", Party deputy chairman Stephen Cachia argued that: "The Nationalist government doesn't seem intent on tackling the problem seriously, preferring to gain politically on the sharp rise in property prices, while extending further building into the countryside. The latest proposals from Labour, on the other hand, attempt to create the impression that the granting of more direct subsidies and interest rate subsidies will solve the problem."

According to Edward Fenech, AD spokesperson on Finance, Tourism and the Economy, there are 40,000 vacant residential units on the island of Malta which are not effectively on the market, thus keeping property prices high. However, he believes that the solution to the housing problem "is much simpler that government and opposition make believe".

"We believe that the most effective and cheapest solution to the housing problem is the introduction of an advantageous tax mechanism to place more of these properties onto the market as well as legislation to ensure that vacant properties are maintained in a decent state of repair," Fenech said.

In its pre-budget exercise, AD proposed that all properties that are not the owner's primary or secondary residence be subject to a flat rate 15% charge on the assumed value of the rent of the property, being 3% of the property's capital value. Thereafter any rent received from this property would be tax-free.

"Just to illustrate a typical example - an apartment that lies vacant, worth Lm 40,000 will be subject to an annual charge of Lm 180 payable every year, but any rent received by the landlord will be thereafter tax free," Fenech explained.

AD has also proposed legislation to force owners to keep vacant properties in an acceptable state of repair.

"It is grossly unfair that whilst residents make an effort to maintain their properties looking good, those who own vacant properties are allowed to leave them to rot, to the detriment of residents. We believe that these proposals will incentivise owners of properties to place their properties back onto the market for sale or rent. This will add to the effective stock of properties on the market and thus act to release pressure on further unsustainable increase in prices. They will also raise revenue for government, revenue that can then be used to give assistance, not just to first-time buyers, but to all those needing assistance."

Cachia concluded suggesting that: "Property rights should also come with responsibilities. Further we believe that our proposals will not only serve to keep prices at more realistic levels, but will also raise revenue for government, revenue that can then be used to assist all those in need, not simply first time buyers."

A comprehensive report in our Intelligence Report series giving background tax and residence information on many of the key offshore jurisdictions is available in the Lowtax Library at http://www.lowtaxlibrary.com/asp/subs_reports.asp and a description of the report can be seen at http://www.lowtaxlibrary.com/asp/description_report4.asp

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