The Auditor General reported to Parliament that despite a significant return on the Capital Transfers Duty Department’s (CTDD) outlay to administer the collection of Inter Vivos transfer of property duty, more could be done to ensure that Government’s interests are appropriately safeguarded. 

All applications received by the Department are, following preliminary vetting, reviewed by a CTDD Internal Board to ensure the correctness of the declared value of property since this value forms the basis of the ‘Inter Vivos’ duty calculation.  However, there are no formal terms of reference or guidelines relating to this Board’s work and the basis of its decisions are not documented.  Furthermore, none of the members of the Internal Board have technical expertise relating to property valuations, though they possess considerable experience.  Additionally, the level of detail on the description of the property being transferred varies from one case to another. 

A National Audit Office (NAO) case study revealed that, in a few cases, the Internal Board accepted declared property valuations which were deemed below the market price.  During the period 2005 to 2008, the Internal Board accepted over 54 percent of the reviewed application forms.

Cases where the declared values may not reflect the market price of the property are referred to CTDD appointed Periti.  The majority of the Periti’s assessments confirmed the declared value of property.  Moreover, most buyers and sellers did not challenge the Periti’s determination of the market value of the property. 

Revenue recouped through the Periti inspections by far outweigh costs incurred.  However, a general lack of documentation weakens the internal control mechanisms related to property inspections.  This is particularly evident in cases where the Periti make downward revisions of their initial valuations in a second property inspection – which is undertaken following the raising of objections to the initial Periti valuations by buyers and / or sellers. 

The CTDD rejected nearly half of all objections regarding initial Periti’s valuations raised by buyers and sellers.   The Department contends that the unwarranted objections were mainly rejected on the grounds of unreasonable contestation.  In these cases the aggrieved parties had the option to seek redress at the then Special Board of Commissioners (BSC).  This Board, however, has not been functioning since December 2004.  This situation resulted in the accumulation of around six hundred outstanding cases.  The BSC has recently been replaced through the establishment of the Administrative Review Tribunal.

In conclusion, this performance audit has shown that, despite the additional revenue collected by the Department, a number of inherent weaknesses in the management of the Inter Vivos process need to be addressed.  The NAO proposed a number of recommendations to strengthen further the relative mechanisms and internal controls.

The full report can be downloaded from the NAO’s website: www.nao.gov.mt from tomorrow.

01.03.2010

 To view report please follow link.