Reactivating the residency scheme

It was, indeed, distressing to read through John Consiglio’s article A Total Societal Approach (April 25). First of all, it is, once again, incorrectly implied that the Residents Scheme Regulations, 2004 namely the Permanent Residency Scheme (PRS) is a scheme aimed to stimulate the property market. The Malta Chamber of Commerce, Enterprise and Industry , together with a number of other stakeholders, has reiterated time and again that this is not the case.

Furthermore, Mr Consiglio seems to forget that under present legislation, which was part of the Accession Treaty, any EU national who chooses to take up residence in Malta, not necessarily in terms of the Residents Scheme Regulations, may purchase property in Malta for residential purposes without the need to apply for any permit whatsoever.

It is a fact that the PRS (and its multiplier effect) was a contributing factor that helped the economy to recover from recession. Suffice to mention that, in 2010 alone, 151 non-EU citizens purchased property in Malta at a value of over €35 million. This does not include EU nationals. When foreign people buy property, they then go on to furnish it, visit Malta regularly and spend money on entertainment. This brings regular and continuous economic benefit to Malta via the furniture industry, builders, catering and entertainment venues, car-hire companies among several others.

The most agonising part of the article, however, is where Mr Consiglio suggests that “property taxation” or “a return to some revised form of requisitioning be explored even within and inseparably from the context of the current review of the conditions of the Permanent Residency Scheme”.

As far as the Chamber is concerned, similar thoughts should not even be contemplated, let alone suggested. No elaboration is required on the issue of requisitioning and how this was abused of to the detriment of bona fide property owners in the past. A painful lesson was learnt that the country must never return to such dark ages when citizens had even lost their divine right to private property.

Similarly, the Chamber is also fiercely opposed to the notion of taxation being used to disincentivise owners from keeping their property vacant. This, too, impinges on one’s right over private property. It would create a dangerous precedent of state interference in what one can and cannot do with his property, assets and belongings.

Property owners have suffered enough injustices through rent-laws legislation which discriminated against them for 70 years. They should definitely not be burdened further through taxation. The Chamber would also like to see a solution to the vacant dwellings issue but it firmly believes that this can only come about through tackling the problem from a positive stance rather than in a negative manner. Rather than the negative taxation alternative, the Chamber has proposed that the government would step in and rent vacant dwellings from the private sector and, in turn, rent them back out to persons and families in need of social housing – for a definite period of time thereby granting the opportunity to the tenant to seek a permanent solution of his own choice and liking.

Such an arrangement would be beneficial to all parties concerned. For the government it would be more economical than building new blocks of government apartments and cluster houses. At the same time, the private landowner would manage to earn some income from his vacant property while society can benefit from more residential property being placed on the market.

Turning back to the issue of the PRS, our Chamber agrees with the Minister of Finance and with Mr Consiglio that the scheme should be of no strain on our economy. We are more than convinced that, on balance, the economy has been a net contributor from the scheme since this was introduced.

Moreover, during our meetings with the Ministry of Finance, the Chamber offered a number of recommendations for its revision that would render the scheme even more lucrative for the Maltese economy in its entirety.

Our recommendations included raising the low minimum rental obligation and we suggested this being immediately raised to €12,000 annually from the current €4,150 per annum which was proved an inadequate threshold.

This, we are positive, (and the government agreed) would curb the undesirable aspects of the scheme.

We also proposed that a looping system is created to restrict permanent residency holders from clocking the five years and becoming long-term residents.

We proposed that any tax incentives would be lost if a non-EU national applies for long-term residency and moreover, his tax liability in Malta become more onerous.

The Chamber reiterates its stand that the scheme should be reactivated without delay. The scheme needs to be fine-tuned urgently and with full consultation with the industries directly affected.

If the authorities do not take responsibility and reactivate this scheme, the damage is going to be irreparable with serious repercussions felt across the whole of the economy.

Mr Tabone is president of the Malta Chamber of Commerce, Enterprise and Industry.