The Malta Developers Association said today that the Nationalist Party's argument that the new taxation system on the sale of property creates inflation and/or abuse is a misinterpretation of how the property market works.

"This system will leave a positive effect on the property market and will help to reduce abuse,"the association said, while adding that it was not consulted before the PN held a press conference on the subject yesterday.

"The MDA, which represents more than 90 per cent of building contractors and all developers in Malta, consulted the majority of its members and it emerged that they are in favour of this reform. A number of estate agents who are affiliated in the MDA also agree with the new system," the association said.

It said that while its reaction to this system is positive, the system should include a transition period until the tax can be applied independently.

In instances where the property is not developed and the owners therefore are ‘non traders’, and for some reason they sell their property earlier than five years after they bought it, the sale should be taxed at the preferential rate of 5%; and
sales by couples who were engaged and call off their wedding after they have acquired a property should be exempted from tax.

"It is good to note that this change is a logical evolution of the Final Withholding Tax system, which was introduced by a PN government with the exorbitant rate of 12%. Apart from this, the country already has a VAT tax system – also introduced by a PN administration – which is a tax that does not depend on whether the sale or service offered is done at a profit or not," the MDA said.

However, the MDA said it is asking the government to consider lowering the rate of 8% to foster activity in the property market.

It is also calling for bigger incentives especially in the sale of property in Gozo.