GRTU urges radical income tax relief

The Chamber for Small and Medium Enterprises - GRTU is urging the government to raise the income tax thresholds by over Lm2,000 in the forthcoming budget.

The measure would cost a whopping Lm40 million but GRTU director general Vince Farrugia told journalists yesterday that projections, of which the government was aware, showed that the boost such a measure would give to the economy would mean a return of Lm28 million to the Administration, resulting in a net cost of Lm12 million.

In the process, he argued, the government would be spurring further economic growth by boosting the people's spending power while relieving them of the heavy tax burden especially in the case of the middle class.

If accepted, the GRTU's proposals would mean savings of up to Lm262 per year for a single person earning Lm5,000 and about Lm450 for a couple who earn Lm10,000 together.

Referring to the rather modest tax band changes introduced last year, GRTU president Paul Abela said the government had projected it would lose Lm12 million in tax revenues but had actually lost half that amount as a result of increased economic activity.

Earlier this year, the Parliamentary Secretary at the Finance Ministry, Tonio Fenech, had excluded the possibility of any income tax changes. The GRTU, however, remains confident that it can manage to lobby the government to change its mind.

Mr Farrugia stressed the need of the measure arguing that, despite the economic growth being registered, people were not really feeling money trickle down in their pockets.

Moreover, the "soft" measures the government was planning in relation to children's allowance did not really leave the substantial effect that a revision of the income tax bands would have.

The GRTU also targeted the property market in its proposals for the budget. The measures, Mr Farrugia said, had to address both the needs of property buyers and those of a market which, he admitted, has seen the end of its boom.

"We need to make sure the sector gets a soft landing," he said, "a crash is in nobody's interest."

In this connection, the GRTU is suggesting to raise the threshold, after which the 3.5 per cent duty kicks in, from Lm30,000 to Lm50,000 for first-time buyers. Still aimed at buyers, it is proposing to see the maximum banks' lending period for home loans being raised from the present 40 years to 60 years.

It also suggested that the final withholding tax on the selling price (levied on people who sell property for business or are selling their second property) be lowered from the present 12 per cent to seven per cent.

Developers now pay 35 per cent on the profit they make from a property sale or 12 per cent on the sale price if the property is sold five years after they began developing their project. This, the GRTU is emphasising, will increasingly become a problem if developers start taking longer than five years to sell.

2008 income tax rates proposed by GRTU

2007 income tax rates

2006 income tax rates