A controversial scheme that exempts people from paying tax on property transfers to set off arrears is temporary and aimed to help businesses during the pandemic, the Finance Ministry has said.

Contacted amid calls for the scheme to be revoked because of the way it favours certain tax defaulters, a spokesperson for the Finance Ministry said the measure represented a “one-time chance” as part of the government’s pandemic-related measures. It is valid until the end of 2022.

The spokesperson also said the stakeholders had not spoken against the scheme when the government first proposed it earlier this year.

The new measure, quietly introduced through a legal notice, allows those with tax arrears due by January 2021 to pay any taxation due on the transfer of property purchased before March 2021 against their arrears.

The move has been met with widespread criticism from a number of industry bodies, among them the Chamber of Commerce, the Malta Institute of Taxation, the Institute of Financial Services Practitioners and the Malta Developers Association.

One of their arguments is that the scheme favours defaulting taxpayers over others. Another is that it does not take into consideration those who have their tax payments in order.

The government has now insisted that stakeholders were consulted earlier on this year.

“It was proposed on March 21, 2021 by the Ministry for Finance and endorsed by Cabinet as one of a series of measures to ease cash-stricken businesses during the pandemic. It also aimed to increase the government’s revenues.

“In this regard, there was no negative feedback by any stakeholders about this proposal during the various outreach initiatives,” the spokesperson said.

The opposition, echoing the concern expressed by the stakeholders, said it would be presenting a motion to the government to cancel the legal notice.

The government has 60 days to table and discuss it in parliament, the PN said, noting, however, that,  until then, the rules would remain in force.

The PN acknowledged that the government might want to launch schemes to collect arrears from time to time,but MP Mario de Marco said in a press conference yesterday that the measure went “beyond that”.

“There are still questions on this. The government did not even publish the guidelines.

“There is also no capping on the amounts,” he said. 

Meanwhile, independent candidate Arnold Cassola has argued the scheme constitutes “blatant hidden state aid to the Nationalist and Labour parties, which, in reality, are being bailed out by the Maltese taxpayer”.

The ministry spokesperson said the scheme reflected the “pragmatic approach taken by government to support business and at the same time safeguarded its ability to collect taxes during exceptionally illiquid and difficult circumstances.

“This avoided costly court proceedings including judicial sales of property by auction to recover arrears of tax due.

“In fact, the scheme is applicable only and capped to revenues generated from assets equivalent to the value of tax arrears due,” the ministry said.

“The government wishes to emphasise that it remains committed to strengthening its efforts related to tax collection and related enforcement of legislation related thereto.

“It also remains permanently engaged in consultations with stakeholders and has taken note of the recent claims on the topic if calls for an amnesty are raised.”

Malta Chamber CEO Marthese Portelli said there was no consultation “on this specific measure and on the legal notice published, nor on its implementation”. 

“In a press conference held in March 2021, the Minister of Finance had mentioned the one-time granting of a tax exemption on the sale of property to facilitate settlement of taxes deferred during the COVID-19 period,” she said.

“This was announced among a list of other COVID-related liquidity measures. 

“However, the legal notice just published specifies that it applies for all tax arrears irrespective of their due date,” Portelli added.

She said that, if proposed in connection with tax arrears that accumulated during the COVID-19 period, then it could be interpreted as a pandemic-related measure.

However, the scheme as laid out in the legal notice applies to all tax arrears, the bulk of which may predate the pandemic, Portelli noted.

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