The 12 per cent final withholding tax on property is increasing prices artificially., the Malta Developers Association said this morning.

In a statement, it expressed concern at the way the property market is being taxed by the government, in particular the imposition of the final withholding tax on the market value of the property that is being sold.

It appealed to the Finance Minister to take the steps that would lead to the resolution of the problem as quickly as possible.

"It appears that government is refusing to recognise that the property market is not what it was and it continues to insist that market values have remained the same as they were a few years back, when in reality the situation has changed totally.

"When this market is in difficulty, it is in the interest of the national economy that there will be no obstacles to the process of what should be a free market – that is, a market that leads to the rising and falling of prices according to circumstances," the MDA said.

It said that, with the current system, there were too many instances when the final withholding tax on what the government believed to be the market value was so high that it exceeded the capital gain that was supposed to be taxed.

"This discourages the possibility that prices will go down and is putting those who are under pressure to sell their property at low prices because of bank loans and other factors in an impossible situation."

The association acknowledged that developers had to face the consequences of the risks they took and not expect the government to help them or subsidise them in any way.

However, the tax imposed should be just and not one that led to an artificial increase in property prices when the circumstances indicated otherwise.

The association therefore appeals to the Finance Minister to take the steps that will lead to the resolution of the problem as quickly as possible.