Amendments will be presented in parliament “in the next couple of weeks” to tighten the fiscal net on the construction industry, parliamentary secretary Tonio Fenech told Business Today.
In the last budget government pledged legal amendments through which banks will only be able to lend money for property development if the demand for such loans is accompanied with a contract of acquisition and fiscal receipts on the works conducted.
“The amendments which will be presented in parliament will follow the same principles enshrined in the budget speech,” Fenech told Business Today.
So far contractors, electricians, plumbers and others engaged in construction have managed to evade government’s tightening fiscal net because property developers are not expected to provide banks with a fiscal receipt accounting for such services when applying for loans earmarked for property development.
This measure had received a cold reception in banking circles, with sources telling Business Today that banks could respond by reducing loan facilities.
Fenech acknowledged that bank’s were initially wary of these measures.
During the past weeks discussions have taken place between the Malta Financial Services Authority and the banking sector during which slight modifications were made to government’s proposals.
Currently, non-fiscal receipts are accepted by banks as proof that loan facilities are being used for building development, thus leaving room for abuse.
At present loans for property development are normally taken against a deed of acquisition with the bank acting as a party to the deed.
Sources close to the banking sector had told Business Today that progress payments are normally paid against contractors’ invoices but these still require the certification by the bank’s appointed architect.
They had also expressed concern that the new measure may increase the bureaucratic process for banks.
Sources also insisted that at the proposal stage, the developers would not have an acquisition deed in hand as in the majority of cases this is concluded with part bank financing.