28 Feb. - 6 March 2001
Chamber criticism on CIS tax
By David Lindsay
Late last week, the Chamber of Commerce hit out at the government for its delay in providing details on exactly how the 15 per cent tax on both Malta and overseasbased Collective Investment Schemes will operate.
Meanwhile, the Chamber also called on the government to abandon the budgetary initiative, which, it contends, would lead to a loss in local investment service business a sensitive area important to Malta's growing financial sector.
A collective investment scheme is a fund maintained exclusively for the "collective investment" of money from several accounts administered by a trust department. Such schemes present on the Malta Stock Exchange include the La Valette, HSBC International, and Melita International fund ranges.
Collective Investment Schemes, the Malta Stock Exchange reports, nearly doubled over the first nine months of 2000 reaching a figure of Lm411 million.
The budgetary initiative is aimed at eliminating a discrepancy between those who invest in Collective Investment Schemes and those investing in other investment vehicles on the Malta Stock Exchange.
The discrepancy lies in the fact that if an investor buys government stocks directly, that investor is liable to taxation. However, when one invests in a Collective Investment Scheme that reinvests in government stock, then no tax is levied.
In order to ensure that all types of investment are treated equally, Budget 2001 calls for the equal taxation on income accrued from Collective Investment Schemes, whether traded on the primary or secondary markets, these include both distributing funds and accumulator funds.
The investor exemption from capital gains tax still remains in place.
However, with three months of water under the bridge since the announcement of the budgetary measure, the Chamber comments that the government's failure to explain exactly how the tax will operate is creating uncertainty in the local financial market.
Additionally, should the government follow through with the Collective Investment Scheme tax implementation, the Chamber has called upon the government to consult widely on the matter and to seek the political consensus of all political parties in order to ensure continuity in projecting a uniform national policy for the financial services industry. The Chamber also explains that the government must ensure that there is no discrimination between local and foreign funds, as such a move would be detrimental to Malta's image as an international financial services.