We welcome you to the main highlights of the Budget Speech 2018 delivered by the Minister of Finance, the Honourable Prof. Edward Scicluna.
The Prime Minister, the Honourable Dr Joseph Muscat held that “It is all part of the strategy we started in 2013 where we set off trying to fix things that needed to be fixed in economy and which has now led us to a situation where we can work for today as well as for the future,” In fact Dr Muscat continued to say that this budget was a budget that for the first time in recent history, included no increase in taxes.
Meanwhile, the initial comment of the new Leader of the Opposition, the Honourable Dr Adrian Delia, was that this budget demonstrated that the government has ‘no plan for Malta’.
ECONOMIC OVERVIEW 2017
Hon. Prof. Edward Scicluna, opened his budget speech by providing a very encouraging outlook of the Maltese Economy.
Primarily, he maintained that in the first 100 days of the legislature, Malta has registered the most successful growth and increase in Employment within the European Union. The following is a short glimpse of how the economy was fairing during 2016 and the first months of 2017:
1. DEFICIT – From a deficit of Eur 300m in 2012, the Country registered a surplus of Eur 100m in 2016, which has continued to increase during the first eight months of 2017.
2. EMPLOYMENT – Registered unemployment rate during 2016 was of 4.7%.
3. ECONOMIC GROWTH – The economic growth in real terms was of 5.5% during 2016 and 6.3% during the first six months of 2017. This is in comparison to a 2.2% economic growth within the EU.
4. INFLATION – Inflation rate during 2016 was of 1.0%.
5. TOURISM – During the first eight months of the year, an increase of 17.03% was reported in the number of tourists who have visited the Country.
6. GOVERNMENT DEBT – This has dropped to 57.6%.
COST OF LIVING ADJUSTMENT, EMPLOYMENT & PENSIONS
1. The Cost of Living Adjustment (COLA) will be of Eur 1.75 per week.
2. Employees will be given an additional leave day over and above their annual leave to compensate for public holidays on weekends. This has the aim of encouraging work-life balance.
3. Minimum wage earners will have their salary revised upwards by Eur 3 per week as of their second year of employment and by a further Eur 3 per week as of their third year of employment.
4. Employees, both in part-time and full-time employment, earning less than Eur 60,000 per year, will benefit from a decrease in taxes through a payment they will receive, which can vary from Eur 40 to Eur 68. The latter will depend on the gross salary paid to him or her the previous year. Employees who are on minimum income and do not pay taxes, will also benefit from this.
5. Pensions will be increased, for the third consecutive year and this by Eur 2 per week. The measure implemented during this year whereby tax is not levied on pensions, will continue to be implemented. Up till now 22,000 pensioners have benefitted from this. Furthermore, the non taxable ceiling for income from pensions, will be increased to Eur 13,200.
6. The Eur 300 donation for pensioners reaching their 75th birthday and who are still living in their own house, will continue to take place.
7. Pensioners who are in employment are obliged to pay social security contributions up till the age of 65. In cases where these pensioners have social security contributions in arrears, and thus are not benefitting from the full pension entitlement, will be given the opportunity to have e new estimate computed which shall take into consideration the social security contributions paid after pensionable age.
8. Pensioners who have as yet not reached the age of 65, and who are in self-employment or part-time employment, may benefit from a flat rate of 15% of social security contributions, paid on a pro-rate basis, on their net income.
9. During this year the carer’s allowance was increased substantially, and was no longer subject to a means test. This allowance started being paid to married couples who have persons in their residence with a high level of dependency. As of next year an additional allowance of Eur 8.15 per week will be introduced for each other member of the family in the case that one of the spouses will lose any other allowance in view of the increased carer’s allowance.
FISCAL MEASURES – INCENTIVISING ECONOMIC ACTIVITY
1. In order to incentivize SMEs, the threshold for VAT exemption shall be increased to Eur 20,000 in the case of services.
2. The first-time buyers measure has been renewed. Another scheme is being launched for second-time buyers who because for one reason or another, are purchasing their second home, whilst not owning any other property. Such persons will benefit from reduced duty on documents up to a maximum of Eur 3,000 and a maximum of Eur 5,000 in the case of disabled persons, which will be received in the form of a refund.
3. Persons who purchase property in Urban Conservation Areas and other scheduled properties in first or second grades, will be assisted with the aim to decrease their expenses. Furthermore the measure introduced this year where duty on documents will be decreased from 5% to 2.5% in relation to properties in UCA, will be extended for another year.
4. This year another measure was introduced where for persons purchasing a residence in Gozo, duty on documents was decreased to 2%. This is being extended for another year aswell.
EMPLOYMENT AND SOCIAL WELFARE
1. This year the In-Work Benefit scheme for low income families is being focused on families with children having only one of the parents in employment. Thus as of next year, the allowance to this category of families, will be increased from Eur 350 to Eur 400 per child.
2. The tapering scheme which had been implemented in 2014 was a success. In this respect, persons who were on social benefits for two years, during the last three years, do not lose immediately their entitlement to social benefits once they are back in employment but this would be reduced gradually. This scheme will continue to be in force and in order to benefit from it, the two year time window that persons need to spend on social benefits to be able to benefit from the scheme, is being reduced to one.
OTHER SOCIAL MEASURES
1. During last year subsidies being given to low income families on the rental of property, were doubled. This year thresholds will be increased again in order for more persons to benefit from this subsidy. The elderly who are of the age of 65 and over will be given special thresholds.
2. The housing authority will be issuing a scheme where owners of vacant properties will benefit from a maximum benefit of Eur 25,000 when such property is re-furbished and rented out to the Government for social housing purposes for a period of ten (10) years.
3. Pensioners who live in Government rented properties and who retire in St Vincent de Paule or any other elderly home habitually continue to pay the rent on their Government rented properties thus continuing to occupy the said properties. For this purpose Government is incentivizing pensioners who retire in St Vincent de Paule or any other elderly home, and who terminate their rental agreement with the Government, by deducting 20% less from their pension.
4. An incentive of Eur 10,000 will be given to cover expenses that families incur, when adopting children from abroad.
EDUCATION AND TRAINING
1. The Government in conjunction with the MUT will enter into a new sectorial agreement to improve employment conditions for teachers.
2. A pilot project will be launched next year to offer new services in relation to autism.
3. More state schools will be equipped with multi-sensory rooms.
4. As of next year half of the examination fees for SEC and MATSEC will be absorbed by the Government, whilst during the year after the examination fees will be entirely removed.
5. Four new schools will be built, and refurbishing works will be undergone on existing schools.
6. Tablets will continue to be provided in the 4th and 5th year classrooms of primary schools.
7. Use of blockchain technology will be offered to enhance security and accessibility to certificates published by MCAST, NCFHE and ITS.
8. Persons who are less than 40 years of age and enroll for a Masters or PHD qualification during the scholastic year 2017/2018, will be exempt from tax through a tax credit, for a period of one year and two years respectively after completion of the course. This tax credit shall be given on a maximum income of Eur 60K given that the persons work for a period of at least three years in Malta. This benefit will be given to persons who follow the courses on a full-time basis and pro-rata to persons who follow the courses on a part-time basis.
9. Further centres shall be opened for more ‘Klabb 3-16’ services to be offered.
10. Jobsplus will continue offering the current training and employment schemes. In respect of the ‘Community Work’ scheme offered by Jobsplus, employees under this scheme will have their wage increased by Eur 200 per month.
1. A new large scale investment project will be launched in which Eur 150 million will be invested. The purpose of this project will be to derive energy from waste.
1. A new agency shall be set up next year, which hand in hand with Transport Malta, will be responsible for road infrastructure, road maintenance and contract methods, with the agency’s primary objective being that of reducing traffic congestion.
2. A plan is being laid down to address 160 residential roads during next year.
3. A project shall be implemented to facilitate a seamless connection between the different modes of public transport including improvement in the ferry service provision from one port to another.
4. During this year persons who turned or will turn 18 in 2017 benefited from one year of free public transport service up to a maximum of Eur 312 per person. Next year this measure is being extended to persons who will be between 16 and 20 years of age during 2018.
5. As of next year the Ministry of Education will be carrying out a study and discussions will be taking place on how free school transport will be implemented as of scholastic year 2018/2019.
6. The car pooling measures giving preference to drivers by using bus lanes, will be made more robust.
7. The refund on VAT when purchasing bicycles and electric bicycles will be extended for another year and will also be extended to those companies offering these types of bicycles for rent. In conjunction to this, an incentive of up to Eur 400 will be given to persons who purchase motorcycles, scooters and electric bicycles. VAT on the rental of bicycles is being reduced from 18% to 7%.
8. Another incentive is being introduced based on the concept of ‘Share the road’ with cyclists. Two routes have been identified for this purpose, one from Valletta to St Julian’s and another from Mosta to the University of Malta whereby the urban roads will be improved to safe guard cyclists and pedestrians. Here CCTVs will be installed, speed limits decreased and electronic messages giving priority to cyclists will be introduced.
9. As of next year, a measure is being introduced exempting from registration tax electric or hybrid or similar vehicles. As of next year road license will not be paid for these kind of vehicles for a period of five years.
10. The scrappage scheme and the assistance being given in respect to vehicles being changed from petrol to gas, will be extended for another year.
11. A grant of up to Eur 10K will be given when wheelchair accessible taxis are purchased.
COUNTRY’S COMPETITIVENESS AND OTHER MEASURES
1. The Government will continue combating unfair competition and tax evasion. In this regard penalties incurred inside and outside Court settlement will be increased, whilst the ‘Joint Enforcement Task Force’ will be increasing its efforts to identity business who are evading taxes.
2. A working group will be set up in order to analyse the opportunities that may arise from Brexit and lay down a strategy on attracting new businesses to Malta which at the moment are operating from the UK.
3. As of next year a new regulatory framework ‘VAT Grouping’ will be introduced in order to incentivize the growth in the gaming industry in a way which will increase value added and safeguard responsible gaming.
4. Malta Enterprise continuously strives to strengthen its existing incentives together with launching new ones. In fact the corporation continued to work on initiatives in new and innovative sectors including disruptive technologies & data management, green projects, new industrial technologies, and research in life sciences.
5. Upon the establishment of the new Business First centre, new services tailored for businesses are being expected.
6. Micro Invest – the benefit will be increased from Eur 30K to Eur 50K for businesses established in Malta and to Eur 70K for businesses established in Gozo, businesses with a majority shareholding held by women and self-employed women. It is expected that this scheme will be extended to businesses employing less than 50 full-time employees.
7. As of next year a new ‘off-set’ system will be implemented where amounts payable to the Government by companies will be off-set against amounts payable by the Government to companies.
8. Currently businesses which employ 30 or more employees have the facility to submit FSS forms and VAT returns online. This is being extended to businesses employing 10 or more employees.
9. The Government has announced a commitment of reducing administrative bureaucracy by 30% over the term of this legislature.
10. Excise duty on steel rods and bars falling under a specific HS Code, will be the same as other similar products in order to instill a level playing field on importation.
1. Employers who offer a minimum of a three year contract to employees in Gozo, will be given a 30% refund on the employee’s average salary up to a maximum of Eur 6,000.
2. A scheme will be launched aimed at increasing the level of tourist establishments in Gozo.
3. Initiatives to promote thematic festivals in Gozo will be launched.
4. Works will be commenced on laying down the second fiber optic link between Malta and Gozo.
5. Studies on the tunnel between Malta and Gozo are still ongoing.
For further information regarding the measures herein stated, kindly do not hesitate to contact us on the following contact details:
T: 00356 21654567
The information contained herein is based on our interpretation of the Budget 2018 and should not be used as a substitute for professional advice. No liability for errors of fact or opinion is accepted.