Family Minister Michael Farrugia has vehemently denied that the Request For Proposals (RFP) on the provision of social housing amount to a tax swap. The offer chosen from the RFP scheme however is for five applicants to sell their property to the government, and from the earnings generated they would pay their outstanding taxes.

A report that appeared on the Times of Malta alleged that the government was considering swapping private properties for pending balanced owed to the government in taxes.

In a press briefing, Mr Farrugia gave a detailed explanation of the evaluation process of the properties, which was handled by a committee made up of architects, a separate board that analysed the proposals put forward, an audit carried out by Deloitte and Touche and finally another audit by PWC which analysed the evaluations made by the architects.

He stressed that the evaluation process was carried out in the most transparent way possible.

Mr Farrugia explained that the government had three options with regards to social housing: that the government buys properties from developers at commercial prices, that the government swaps private properties for public land and lastly that the government buys private properties and with those earnings, the applicant would have to settle any pending balances it had with the government. There were five applicants who suggested this when the RFP was released.

Two of the five are no longer interested, one had already sold off their available property and the remaining two applicants had their proposals evaluated by a board of experts. Out of the last two, one applicant has already accepted the price offered to it by government for the property swap.

Pending balances refer to outstanding tax payments. Asked how this does not amount to a tax swap, Mr Farrugia said that these were the terms suggested by applicants when they submitted their RFP.

He said that the Family Minister does not know how much tax the applicants owe the government, and therefore is unaware if the amount offered to the applicants covers the tax owed.

The price offered by the government for the properties is non-negotiable, Minister Farrugia stressed.

Asked again how this does not amount to a tax swap, he said that till now one person has accepted the price and the next step would be for the government to find a “formula” to carry out the proposal within Maltese law.

He said that the question of whether the applicants and the government had entered into an agreement to swap the property for the pending balances, is the next step and is part of a process that is yet to be determined.

He repeatedly termed the payment of outstanding government balances, i.e. pending taxable payments as “making good on pending government balances.”

The two applicants who proposed this swap are offering a total of 135 apartments, some ready, shell or under construction. Minister Farrugia said this option was the one chosen because it was the most financially viable for the government.

When questioned about whether this swap could open the floodgates for abuse by developers or property owners negating to pay their taxes with the intention of entering into a government agreement, and that this could be unfair because this tax break, so to speak, is only available for property owners, Minister Farrugia said the RFP was open to all. He said that the government never approached anybody with the suggestion, and that it was available to the whole public.

He said that the architects tasked with analysing the evaluations of the properties offered were immediately asked if there was a conflict of interest – that could come about if the architect had worked on the design for the properties in question.

“There was not one second of the entire process where any architect had a conflict of interest. The moment any conflict of interest could have arisen the relevant architect was removed from the task,” he said.

When asked about whether the Ministry of Finance had any objections to this scheme, Minister Farrugia repeatedly said that discussions with all ministries are currently ongoing.