Backtrack on government architects

Government decides at committee stage to exclude rental of commercial property from a 15% final withholding tax rate.

Pressure from the finance ministry’s own budget office has led Finance Minister Edward Scicluna to U-turn on implementing two crucial measures that Labour promised, in pandering to the construction lobby before the 2013 elections.

Senior civil servants advised the minister that the introduction of a 15% withholding tax on property rented for commercial purposes, would lead to a severe drop in government revenue from those already paying 35% tax on property rentals.

The other proposal that had been spearheaded by the construction industry was the removal of the government architect for valuating sales of properties.

Scicluna in his Budget had proposed using the services of private architects. Once again the finance ministry strongly advised that this measure would lead to some serious abuses and Edward Scicluna has accepted to withdraw this proposal.

A series of amendments proposed by the government at committee stage this week in parliament were described as “discriminatory” by the Opposition.

Among these was the introduction of a final withholding tax rate of 15% for the rental of residential property, and a special tax rate to footballers of 7.5% on their income.

At committee stage, it was decided that the 15% final withholding tax rate would exclude commercial property rental.

While Scicluna has argued the measure was being applied to fight tax evasion, Opposition MP Tonio Fenech accused government of granting tax cuts to evaders, as opposed to honest taxpayers.

“This measure will create anomalies and distortions in the property market, as owners will prefer renting property for private purposes than commercial,” Fenech said.

Read the full report in MaltaToday