Realistic inflation index

Our capital gains tax legislation does not need an overhaul or that it be wiped off our statute books, nor to qualify as the perfidious, obscene and monstrous bit of legislation it turns out to be. What it needs is the introduction and application of a fair and realistic index of inflation which acknowledges that the price of a house in 1982 has risen five times as much not, as the present index being applied indicates, hardly twice.

This is an example of a recent sale, the capital gains tax on which has been calculated as follows; a purchase of a Swieqi terraced house was made for Lm18,000 in 1982 by a non-resident. He sells for Lm86,500 in 2004. With the application of the existing index of inflation the cost of acquisition (Lm18,000) is revised up to Lm26,500 in 2004 and the deemed profit is Lm60,000. He is charged capital gains tax at the rate of 35 per cent on the Lm60,000, that is, a tax of Lm21,000!

The immediate introduction of a property index is a must and in any case this should now be published for the purposes of the recent amendments to the Immovable Property (Acquisition by non-Residents) Act. Hopefully, the new indexation will genuinely reflect the astronomic increase in the value of immovable property in the last 10 to 20 years.

As it is, an injustice is being perpetrated with residents and non-residents alike. It must also be realised that with the imposition of CGT on inherited property the realistic property index will make this fiscal imposition (especially for post-1993 successions) less punitive.