Estate agents attack 'unfair' property tax

Parliamentary Secretary Tonio Fenech yesterday faced the frustrations of estate agents who are still not satisfied with the final withholding tax regime, despite the amendments made recently.

Mr Fenech, along with Charles Mangion, the Labour Party's main economic affairs spokesman, were guest speakers at the Vodafone Economic Forum, sponsored by Radisson, The Malta Economic Update and Progress Press.

Estate agents made it clear that they were still not happy with the amendments, despite Mr Fenech's claim that the recent changes were arrived at after consultation.

"Will you listen to anything we tell you today," a feisty Frank Salt started off before listing the gripes he had with the new tax regime.

The parliamentary secretary did not commit himself but did not exclude further changes based on the comments made yesterday.

In the last budget, the government announced a final withholding tax of 12 per cent on the value of a property without allowing for expenses and other related exemptions that used to apply under the old tax regime.

But the amendment now allows sellers to choose between the new or old tax systems when selling their property within what is being called a five-year window.

Echoing comments from other colleagues, Mr Salt said that the time window was an unfair device. He pointed out that people often did not have control over when they could sell their property, arguing that a person selling his or her property up to a day before the five-year deadline was in a completely different position, tax wise, to somebody who sells it a day later.

The new system could only make sense in areas where properties appreciated significantly, he continued, adding that the worst-off areas will be places like Zabbar, Tarxien and Mosta, the average priced property.

One agent cited an example using the withholding tax, saying that if an agent bought four properties worth Lm90,000 each and then sold them a year later for Lm100,000, that person would make a profit of Lm40,000 but had to pay Lm48,000 in tax (Lm400,000 x 12 per cent).

Mr Fenech defended the amendments, saying that the time window and the whole reform was intended to differentiate between traders and sales of a capital appreciation nature.

Sales beyond a period of five years is deemed to be of a capital nature. Moreover, the reform was aimed at promoting the sale of hoarded property as well as to address what he called a number of anomalies that cropped up from the changes made to tax on inherited property.