MDB issues new scheme with revised collateral requirement after the Malta Chamber of SMEs highlights difficulties
23 September 2020
Following problems flagged by members on accessing the MDB loan scheme, the Malta Chamber of...
The Scheme announced by Minister Tonio Fenech to help the owners of property who own the thousands of empty apartments that remain unsold and others believing that productive investment as compared to speculative property dealings as a much faster road to really big money is not bad in itself. It does however speak very badly about the principles that rule this Government.
There is something very very wrong when a Government is so ready to side with hoarders of property and speculators against the better interests of the rest of the community. Over the last years again and again this Government has exhibited an unreasonable long love-affair with property speculators. Many erstwhile staunch supporters of this Government detest this deeply and deeply. Most small business owners fall precisely in this category. They never ask Government for anything. And they never get anything anyway except additional burdens.
First there were the incredible rounds of amnesties to absolve the frauds of those who were quick to move their funds illegally to foreign money markets or to hide them in Malta itself irrespective of the laws being broken. The law proved over and over again there was a law for the small man and another, much different, for the speculator who evaded tax in millions of lira. Government was quick to issue amnesties and was happy to see the flows back in circulation, official money laundering really, without even the slightest direction as to where and in what these flows of moneys could go. GRTU then also was brought in on the ticket to give support even though many in the organisation objected most strongly. The Director General of GRTU Vince Farrugia then insisted strongly with Government to cause a diversion of these funds to socially and economically desirable investments through the creation of appropriate Bonds so the millions laundered through the amnesties would not flood the property market. Government was however only keen to prop its financing by the addition of the small fines imposed on those who grossly enjoyed the amnesties. Fiscal frauds are wrong in principle but at least an effort should have been made to obtain investments with this laundered dirty money from which the community could benefit. Instead the laundered moneys where given a free rein to compete with clean money earned by the tax abiding honest investor. These moneys were moneys that were driven out of the Maltese economy when the Maltese economy badly needed these millions to create the new jobs, but the new jobs were created through the work and tax payments of those who did not evade and did not breach any exchange control rules. The vast majority of entrepreneurs worked and paid their taxes and invested in property, which was theirs after tax.
When the new flows of money rushed in, a total close to one billion euro representing a total gross tax evasion of more than three hundred million euro, what happened was that the price of property shot up beyond whatever any small operator could afford. The worst victims were the young couples and first time home buyers and families who wished to buy their larger home for the family got bigger. These honest people through Governments rushed amnesties now had to break their backs to meet the new hefty prices that property owners were now demanding. Many small contractors in the construction industry enjoyed the new building boom and Government appeared happy to see an artificial growth in the GDP. Any economist worth his salt knew however that this was short-lived and it represented very bad economics. The Banks then were enormous and so unjust. The new laundered money owners where the lords. Our banks were more interested to finance the new property development and most bankers began to see small entrepreneurs as a nuisance. They were interested in the hundreds of millions not in the tens of thousands demanded by the self-employed. The distortion that was registered in the Maltese economy is still visible for all to see. Like all property booms before however the amnesty funds generated property boom soon came to an end.
Unfortunately the worst recession that hit the industrialised world in 60 years hit us also as the world recession hit our shores. Our enterprises bleeding already from the reluctance of banks to consider them as a priority in the boom years now had to face the recession with plants and system that were not smart enough to meet the new threats and challenges. It did not matter too much to government. It took government three years to listen to the cries of GRTU to provide a sound financing package to help small businesses invest and grow. The Micro Invest scheme did help but only marginally. The Microcredit scheme came in two years too late and it had to be the Bank of Valletta to save the Government as Government actually put out nothing to really relieve small business owners of the credit famine that faced them. Malta Enterprise produced through EU Funding a number of interesting schemes and so did ETC. When you however consider the hundreds of small firms who benefitted as a ratio of the total number of small business in Malta, the total is really insignificant. That is why among the large community of self-employed and small business owners this Government is so unpopular. These are the people who suffered the brunt of the increased bureaucracy and arrogance of bureaucrats as the whole lot of the acquis communautaire was imposed on small Maltese enterprises and in return they practically got nothing. They always sweated on their own and their valiant work for the politician in power is only a statistic to boast with as elections get closer.
It is though not the same story when it comes to property speculators who make millions even if they evade as many taxes as they can possibly manage. Money begets money and money opens roads. For the first time in many years young couples and small operators were reaching out to buy properties that they could somehow afford as the pressure by the banks on many speculators who owned the properties unsold and heavily burdened with bank loans forced these speculators to put out the properties on the markets at prices that families and small businesses could afford. The market was slowly moving to find its true base as their demand for the previous high prices simply did not exist. Many Maltese home buyers where till yesterday breathing a fresher air. They were also betting that as the pressure grew on the speculators to down price the hoard of properties they owned that prices become even more affordable. Many really believed that this government was clever enough to actually plan a property purchasing push by families as prices continue to tumble. Many self-employed were already seeing that the demand for their services as new house-owners searched for finishers and furnishings was on the increase. But that's not how those who decide for us in Government think. They somehow thought of the speculator first not the whole community.
There is a glut of property on the market not just in Malta but also in most other countries competing for foreign buyers. Speculators who invested in properties in Malta hoping to make a quick return by selling to foreigners believe that the foreign buyer is there and that foreign sales are the safety valve to hive off the more expensive properties. Government now came forward with a scheme that is not bad in itself but the aim is clear: Government wants to halt the slide in property prices and is helping speculators to keep the price of property from falling any further. One cannot talk of two separate markets, one for foreigners and one for Maltese, the market is one. Government knows this very well. They have the statistics and they made their studies carefully. The political decision has been taken: Government is choosing the speculator for the young couple, the family who seeks a larger home, and the small investor who wants to buy property to expand his business. Government Ministers believe they can interfere in the property market without imposing a socially unjust feedback. But it is not like this. It is wrong economics and it's socially unjust. Government acted wrongly when they introduced tax amnesties without seriously channelling the laundered moneys that flowed back in the Maltese economy. Now again it has succumbed to the speculators. The question we seriously ask is simply: What's so wrong with this Government? And with the Opposition too as they pressed harder to make the speculators happy. It's the little man that never has any friends. This is the Political Power of property Speculators.
Government would have been wise and promote a policy that made social and economic sense if they launched a wide ranging scheme that gave tax advantages to Maltese young couples, families and small enterprise owners to buy the empty properties. There are enough tax advantages to foreigners in discrimination against tax paying Maltese citizens. It is high time that tax advantages are given to the Maltese. It is a shame that some business community representatives continue to promote further tax advantage to foreigners rather than to Maltese taxpayers. The speculators friendly tax advantages to foreigners that Minister Tonio Fenech and the Cabinet of Ministers approved are aimed at rich Russians, Chinese, Iranians, Arabs and Africans. The five hundred million Europeans members of the EU do not need and cannot be tax advantaged. EU citizens will only benefit if the long list of tax obstacles still hampering free movement of citizens across EU borders are removed. That is what GRTU through its representative at EESC has strongly advocated (http://eescopinions.eesc.europa.eu/eescopiniondocument.aspx?language=en&docnr=1169&year=2011). This property speculator friendly measure is anti-Maltese and anti-European. It smells.
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