I was amazed, to say the least, to see the new conditions pertaining to the Final Withholding Tax on property, announced in the Budget last week.

I do not know who in the real estate business was consulted on these new measures, but I certainly wasn’t, and with 48 years of experience in the local property market, I feel I could have contributed some useful input.

So I would like to put my reactions in this article, as being the only way I can get my feelings and opinions across to the authorities and those people and companies who will be favourably affected, and more importantly, those who will be very adversely hit by the new measures.

There have been negative reactions from the Notarial Council, and I do not blame them.

There has been a favourable reaction from the Malta Developers Association, and I do not blame them, either.

Any person who has held their property for a long time and any developer who has built and sold a property should be very much in favour of these new tariffs.

Well done to the authorities on that score.

But the seven per cent withholding tax for a 12-year period, which has now been removed and replaced by an immediate five per cent/10 per cent Final Withholding Tax, was there for a reason.

That reason was to protect ­people who had to sell property urgently. These people are the last people that should be penalised in this way.

For example, say a couple purchase a flat, adding on stamp duty and purchasing fees.They do work on the property, change floors, doors, redecorate...

They get married. And after one year they separate.

The property market today is good, but not that good. They would never sell their property for a price greater than what they paid plus all expenses.

They sell at a loss or if very lucky break even, and then they will be made to pay a Final Withholding Tax of five per cent on the sale price. Is that fair?

The seven per cent withholding tax allowed them to claim expenses and if they sell at a loss then they would pay no tax. That is fair.

Another example: a married couple purchase an apartment and arrange it to their liking, spending a lot of their hard-earned money. After two years, someone purchases an apartment next door.

The seven per cent withholding tax for a 12-year period, which has now been removed, was there for a reason

They do not get along with each other, the situation becomes insufferable, and so they want to sell their flat and move elsewhere. They too will probably make a loss and pay capital tax on a loss.

A third example: a couple buy a one bedroom flat and get married. This is all they can afford. After a year they have twins. The place is too small. They have to move.

Again, the sale will probably be made at a loss and again they will have to pay a capital tax on this loss.

Or say a company takes a shop for a new business. The business fails. The shop has to be sold. Same situation.

What if a family purchase a property as a rental investment but have to sell it after one year because of family commitments?

They will probably sell at a loss and pay capital gains on the full sale price – capital gains on a loss.

There are many more scenarios, and each takes place every day in the property market.

This is why the seven per cent withholding tax is so very important: to eliminate tax on losses and to be fair on everyone.

These new conditions in the Budget assume that the property market in Malta will carry on increasing in value each and every year.

In the 48 years that I have been in business, there have been a few times when the property prices fell. It can happen again.

Seven per cent withholding tax catered for this possibility.

Even today, the owners of property in the better developments purchased in 2007/2008, which were the peak years, would have great difficulty breaking even if they placed the properties on the market for sale today.

With all their expenses to purchase and sell, they would probably be liable for capital tax on a loss.

These are facts; facts that could have been obtained by simply making a telephone call to people in the business.

The new regulations are good for developers and people who have owned their property for many years.

My strong advice is to leave the seven per cent provisional tax as it was, to protect those who simply must not be made to pay tax on break even, or even more unfairly, pay capital tax on a loss.