Scicluna hints at regulating rental market by monitoring contracts between landlords, tenants

Finance Minister Edward Scicluna hinted at the regulation of rental markets, not through control, but through the monitoring of contracts and dealings between tenants and landlords in order to ensure that the rights of both are being honoured.

"When we speak about regulation we are not talking about control. We are talking about regular monitoring of contracts between landlords and tenants. The fact that you have tenants who do not have access to their utility bills does not happen outside of Malta. Landlords not declaring their rental income is also something that needs to be further looked into."

He said that there were only a few instances where, after the government announced that it had doubled the rent subsidy, a few could not take up this offer as they were not in a position to reveal that they are renting out a property. Indirectly, this means that only a few could not take up the offer because they are not declaring their rental income.

Responding to heavy criticism received when the minister said there is no crisis in the rental market, the minister alluded to possible regulation through ensuring that contracts are honoured to protect both tenants and landlords.

"When I said there is no crisis in the rental market, I mean that it is not a question of a speculative balloon waiting to explode...It is just a question of higher demand than supply...this pushes up the price of property and rent.

"Would this rental market need regulation? When it comes to contracts, the stories we hear are outrageous, and we are looking at that. Regulation does not necessarily mean control."

Prof. Scicluna was addressing a pre-budget breakfast in which he gave an overview of Malta's current economic and fiscal situation, outlined priorities for the budget and also address current pending issues facing the nation. The budget will be presented to Parliament on 9 October

"There are ways where you can affect the rental through regulation by contracts being properly honoured by the landlord and the tenant. I have a lot of things to say, but is it a national problem? 86 per cent of the property is owner occupied, some of it is on a mortgage.

"I would be more alarmed if interest rates were to spike, they would affect more families than the rental markets in terms of numbers.

Budget policies must point towards "increasing supply"

"In Malta, we associate rent with social housing, which was controlled by the government subsidies. Of course it hits a number of people and it is painful. What I have told my people is look at the budget, every policy must work in one direction, increasing supply. We are trying not to fan demand."

Budget proposals

Prof. Scicluna outlined the main issues facing Malta currently, mainly waste disposal, congestion, and a lack of space.

Waste management has recently made headlines due to the Maghtab landfill reaching full capacity. A choice therefore has to be made whether to employ a short-term strategy by creating another landfill or some other long-term strategy.

"Waste is an issue. We have not literally put it under the carpet, but it is there facing us. We have a big political choice, the NGOs have a choice to make as well.

"We have scarce resources on the island, where I am talking of Outside Development Zones. We have to decide whether we want to sacrifice more pristine areas, especially close to Maghtab, or else find and complement them with other solutions".

He did not outline what these possible solutions could be. Proposals on tax evasion The minister revealed that tax evasion is high on the government's agenda, adding that a join enforcement team has been set up in order to "have a serious look at the Inland Revenue Department in terms of software and operations".

Government will be setting up a new appointment of Permanent Secretary tasked with restructuring the revenue department and helping it deliver better results.

"We want a firm, tough but fair revenue department," he said.

Turning to the issue of corporate tax, Prof. Scicluna said that government wants to make an exception for digital companies and tax them on revenues earned in the countries they are providing services to rather than on profits.

This is somewhat ironic in view of the European Parliament’s and the Commission's desire to have all multinational corporations paying taxes where they are earning their revenues. Malta has resisted this move because of high government revenue earned on foreign company profits due to the rebate system that allows those companies to effectively pay 5 per cent corporate tax.

The minister called for any changes proposed with regards tax within the EU to be directed towards the OECD because any "unilateral decision" by the EU could have serious effects through China and the USA responding by making their tax jurisdiction more favourable, and attracting investment away from Europe.

"Malta's stand is yes, companies have to pay their tax somewhere. This is being discussed by the OECD. If the EU has any bright ideas, they should be sent to the OECD so that we can involve China and the US. Unilateral decisions by the EU can have serious effects and should be discussed within the OECD."

During question time, attention was raised to the large number of eateries under-declaring their income, for corporate tax and for VAT purposes. A study is currently underway into this.

Despite the budget theme being the improvement of Malta's infrastructure, brief words were spo- ken about concrete steps to improve the infrastructure. Prof. Scicluna outlined how Malta falls well below the EU average in terms of infrastructure.

That being said, government has already embarked on projects to improve infrastructure such as a huge scheme to improve Malta's road infrastructure.

Economic overview

Prof. Scicluna proudly outlined the low 52 per cent debt to GDP ratio, far lower than the EU average, as a sign of the government surplus being put to good use, as it provides "fiscal breathing room". He spoke of how Greece’s, Spain’s and Cyprus' high debt means that the government must continue to restructure, leading to clashes with all sorts of unions.

On poverty, the speaker said that it is just not right to say that poverty is on the increase, however that is not to say that poverty is being ignored.

"There is a difference between the existence of poverty and poverty on the rise. It is not, all data we have points otherwise.

"The EU asked households whether they are able to make ends meet. Last year, the EU asked households whether they are able to make ends meet, and whether the previous year was the same as the current one.

"We are finding that less and less households are feeling unable to make ends meet...there are less families who are unable to make ends meet, but of course these families are still in existence and we need to tackle this".