With the advent of the global credit crunch which has brought property prices in most countries crashing down to pre-2004 levels, there have been a number of initiatives by world leaders to help stabilise the markets by providing tax incentives for first-time buyers as well as state-sponsored loans. You would assume that all modern EU states would have implemented similar policies.
I am a 24-year-old Irish citizen who has been residing in Malta with my wife and two children for three years. I have been working all of these three years earning a decent (but by no means big) wage and therefore paying a hefty amount of tax. I was delighted to hear pre-election promises of lowering this high tax from its current level of 35 per cent to 25 per cent but I wasn't at all surprised when this pledge was completely ruled out after the government retained power, the credit crunch being cited as the reason for this. Maybe the government couldn't now borrow enough money to pay for the deficit this lowering of tax would create? Or maybe they were just full of it from the beginning.
Anyway, after three years of saving (despite my huge income tax burden), I finally got enough money together to pay a 10 per cent deposit on a property as well as the huge five per cent stamp duty (huge for a first-time range value of property!). I decided to buy a property which was "on plan" because that was one of the cheaper options and would stretch my budget further even though I would have to invest more money to complete the property by purchasing my own kitchen, etc. I completed the purchase last September with the intention for it to be finished in December of the same year.
As mentioned above, during the time that my property has been under construction the value of property around Europe has been plummeting.
As a first-time buyer who has bought at one of the worst possible times I grew concerned at the inevitable prospect of going into negative equity with my new acquisition, especially when I considered that 20 per cent of the new apartments in my block had yet to be sold.
Even though my property has now been finished for a month I do not yet have enough funds to buy essential things, such as a kitchen, to allow me to give up my rented accommodation and move into it.
You can imagine my great surprise during this period of decreasing property value and negative equity, when I received a letter from the Malta Inland Revenue stating that my property is worth €20,000 more than what I had originally paid for it three months beforehand, and that I have 90 days to start paying the extra €1,000 tax I owe for the property. The basic truth is that if I went to sell my property now there is little to no chance of me getting back what I paid for it. I knew this when I purchased the property and was hoping for at least an increase in the next three years before I had a chance to sell (or feel the wrath of more tax). For this reason I would like to ask the Maltese government how they can find the face to charge me more tax for it!
If I were to get an independent valuation of my property, which would in all likelihood show a drop in value over the last three months, would the Maltese government then give me a rebate of the tax I paid already?
Besides this, I was in the lucky position to be able to put enough funds together to get on the property market in the first place despite the government's best efforts to hinder me with a huge tax burden. I can only wonder what chance normal kids in Malta have when someone who is deemed worthy of being in this country's highest tax bracket has struggled so badly as a first-time buyer?
We all already know that this is nothing more than state-sponsored extortion of some of the most vulnerable people during this economic period. What frustrates me so much is the great probability that nothing will ever get done about it.