Budget 2022 was not the usual end of legislature budget that we have become accustomed to. Instead it was a forward-looking budget that looks beyond the normal electoral cycle, and sets its views firmly on the future. While indicating the need for continuity in striving for economic growth, it shows that the momentum achieved will be channelled differently.
This approach is clear in two specific areas: home ownership and transport emissions.
In past budgets, the approach was a generic cut in the stamp duty for first time and second time buyers. While maintaining this, Budget 2022 introduces incentives so that demand for property changes towards traditional dwellings. The Budget includes very substantial grants for households to opt for properties that have been abandoned, and to change properties in a way that marks a return to traditional features of Maltese buildings.
Budget 2022 introduces incentives so that demand for property changes towards traditional dwellings.
Not only is no stamp duty being imposed on the purchase of such properties, but they are being exempted also for the purposes of capital gains.
First time buyers, on top, get a grant of €15,000. This rises to €30,000 if the properties are in Gozo. Any works conducted on these properties can benefit from a VAT grant of €54,000.
Let’s take, for example a first-time buyer who buys an old property in Gozo, say for €250,000. Government will have paid one-eighth of its cost up front. Essentially the initial deposit will be covered by the State, with money to spare. No stamp duty will be applicable. When the property is resold, there will be no capital gains tax. A large chunk of expenses of doing up the property will be covered by the State. Before, people may have thought twice of buying a townhouse in the middle of their village. Now, they will think twice of buying the new flat in the outskirts of the village.
A game changer for Malta’s urban landscape
These policies have the potential to become a game changer for Malta’s urban landscapes. Before, government was providing tax incentives for all properties, and many were opting to purchase the cheapest properties available – flats. To create a supply for this demand, developers were tearing down traditional homes and creating flats. Now, the incentives are clearly for someone to purchase an existing home with Maltese features and do it up, or to buy a newly constructed property that has traditional Maltese features.
Demand will change. And so will supply. This is what progressive policies are about. They are not based on imposition. Instead, they solve issues by creating the right incentives for behaviour to change. We have already seen this in employment and social welfare policies. From passive systems that led to low employment rates and benefit dependency, to active systems that make work pay and help people to better their situation.
Budget 2022 also applies the same approach to another great challenge faced by our nation – how to tackle emissions by our transport sector. Rather than going for draconian impositions, the approach is once again to create the right incentives for people to do what they would prefer to do, but which right now does not make financial sense.
At present, electric cars are far more expensive than existing cars. The average person would prefer to have a car that pollutes less but cannot face the cost of doing so.
In steps Government with an offer that goes up to €3,000 to scrap a car. Then if one opts for an electric car or a plug-in hybrid, there is a financial grant of up to €12,000. That more than covers half the cost of the new car, making the electric car a reasonable option financially. And it does not stop there. There is no registration tax and no annual license fee for five years. Before you thought twice before buying an electric car or a hybrid. Now you will think twice of buying any other type of car.
It is clear that Government has heard people’s cries to have aesthetics valorised, to save what makes our towns and villages Maltese, to protect Gozo more than other regions, and to help combat climate change. Rather than impose and leave burdens fall squarely on the shoulders of consumers, Government has provided very generous incentives for people to be able to change their demand for housing and for transportation types.
This is how to build a progressive legacy for our nation.