Malta Budget 2010 Highlights
Malta Budget 2010
a. Gross Domestic Product (GDP)
During 2009 the Government’s income increased by €165 million and is expected to increase by a further €208 million during 2010. The GDP for 2009 is expected to decrease by 2%. Due to the expected improvement in government economies during 2010 following the international crisis an economic growth of 1.1% is expected in the Maltese economy. Unemployment is also expected to decrease due to economic recovery and incentives promoting job creation. The government’s recurring expenditure for 2010 is expected to be €2,288 million, an increase of €62 million. The government’s capital expenditure is set to increase to €430 million during 2010, an increase of €126 million over the revised 2009 figures.
b. Rate of Inflation
The rate of inflation in September 2009 stood at 3.5% and is expected to be around 2% during 2010.
c. Cost of Living Allowance
The cost of living increase has been set at €5.82 per week which will also be given in full to pensioners.
d. The Deficit
The government deficit for 2009 is expected to reach €217.6 million. This is mainly due to the increase in the recurrent and capital expenditure. In 2010, public debt is estimated to reach 68.74% of the Gross Domestic Product.
e. The Labour Market
The number of gainfully employed as at June 2009 was 144,743, a decrease of 0.2% over the 2008 annual figures. During September 2009 the number of persons registering for unemployment was of 7,521.
GOVERNMENT’S FISCAL POLICY
- The income tax reforms introduced during the last three budgets resulted in leaving €152 million public disposable income. The income tax rates were not revised in this budget.
- The €16.31 levy on credit cards will be removed as from 1 January 2010.
- The fees for the registration and licensing of power boats will be significantly reduced depending on the engine power.
MEASURES IN FAVOUR OF FISCAL CONSOLIDATION
- Government to retain (or lower) the financial estimates for 2009, in a bid to reduce expenditure.
- The number of new employees employed with the public sector should be substantially less than those leaving the sector.
- The introduction of a new tariff structure for Government entities having the potential to generate revenue and currently receiving Government subvention to do away with funding from central government.
- Improved efforts to detect any fraud, tax evasion and abuse of social benefits.
- Duty on cigarettes shall be increased by €0.15c.
INCENTIVES FOR INDUSTRY AND ENTERPRISE
Increased assistance shall be given to Malta Enterprise to become an agency of wider economic development in order to meet the needs of all those undertaking an economic activity while simultaneously promoting foreign and local investment. Assistance shall be granted to enterprises engaging in international business.
Government has resolved to extend the €30 million already allocated, in research and development, assistance to small and medium sized enterprises to renovate their processes, products and services, assistance to innovative companies and use of IT in companies’ operations and renewable energy, by allocating a further €7 million to International Competitiveness, Innovation, Research and E-business.
The need to provide further incentives so as to encourage the creation of new industries, particularly those with a high added value to the Maltese economy, Government is increasing Malta Enterprise’s incentive allowance to €9 million. Three new initiatives targeting foreign investment shall be launched mainly to:
- Encourage the establishment in Malta of vertical operations by foreign investors already operating in Malta, including legal, financial and back office operations;
- Encourage the setting up of shared services centres such as call centres and software development, digital gaming, human resources accounts and finance management by new foreign companies;
- Renew and add to those enterprises eligible for fiscal incentives given under the 2005 Reinvestment Tax Credit (Income Tax Rules) which consist in a tax credit given whenever profits are re-invested in a project approved by Malta Enterprise.
Government plans on encouraging the research and innovation sector. €1.7 million shall be allocated to doubling the Research and Innovation Fund, devising a National Strategy for the Development of the Digital Gaming Industry, and the setting up of a data bank regarding the Genome Uman. An allowance shall also be granted to the University of Malta to set up the Malta University Research, Innovation and Development Trust Fund with the aim of encouraging research at the University and assist its use for industrial and commercial purposes. Donations of at least €150 shall be deductable from taxable income up to a maximum of €50,000.
Research products approved by the Ministry of Finance and the Malta Council for Science and Technology, shall benefit from a refund of 15% on expenses on which tax has been paid.
Persons and entities undertaking research leading to patents to cover their inventions shall be granted a tax exemption in respect of royalties and similar revenue, limited to a maximum amount, yet to be established.
SMALL BUSINESSES AND THE SELF-EMPLOYED
A €10 million fund shall be established to give a micro credit not exceeding €25,000 to small and medium sized enterprises and the self-employed so as to provide them with the necessary liquidity for investment. This credit shall be advantageous in that it shall not require the same collateral as requested by banks, while enjoying advantageous interest rates.
A 40% tax credit, up to a maximum of €25,000 shall be given to sole traders and those self employed persons and enterprises employing up to a maximum of 10 persons, which in the coming two years, upgrade their shop, invest in machinery and technology which enhances their operation including energy efficient systems, compliance with health, safety, environmental and physical access regulations and the creation of new jobs after the 10th November 2009. The tax credit shall be increased to 60% where this investment is carried out in Gozo.
The budget further aims to sustain Trades and Crafts Enterprises by setting up a fund of €200,000 for this purpose.
INCENTIVES FOR TOURISM
€31 million shall be allocated to the Malta Tourism Authority, including a special package which provides an increase from €2 million to €5 million specifically tailored to address the financial crisis. Government is also allocating half a million Euro to sport organisations.
The Malta Tourism Authority shall also extend its assistance scheme to those hotels which increase their advertising from 2009, by financing half the additional expenditure.
INITIATIVES FOR JOB CREATION
A total of €3.3 million will be allocated to the Employment and Training Corporation. A new scheme known as the Work Trial Scheme, seeking to integrate unemployed people in a workplace for a period of 12 weeks, shall be launched.
The government is also extending its help to working mothers who want to join training programs, with the payment for childcare services. Advisory services to those seeking employment are also being enhanced. Amongst other incentives, assistance shall also be given to those who upgrade their workplaces in order to employ severely disabled persons.
CHILD CARE SERVICES
The government is seeking to promote Child Care Services and with this objective in mind is allocating an increase of €300,000 in order to meet the demand for this service.
An incentive will also be given to those employers who incur costs in order to create a working environment where child care services are provided for their employees’ children.
The tax reduction of €1000 against taxable income currently applicable in respect of children under 3 years of age attending registered centres except during the summer months, is being extended to cover children of all ages, attending such centres during the summer months.
MEASURES FAVOURING FISCAL MORALITY AND AGAINST TAX EVASION
The Inland Revenue, VAT and Customs Departments shall join forces so that information gathered by them can be used by the new entities’ different sections. Amalgamation will improve the service given to clients whilst also enhancing the enforcement of fiscal laws.
With effect from 1st January 2010, no refunds of income tax and VAT shall be granted to tax payers who fail to file their tax and/or VAT returns. Aggressive tax planning will be addressed through the introduction of provisions decreasing uncertainties in the application and interpretation of fiscal laws.
A Taxpayer’s Charter will be developed next year to aid the public in understanding its rights as a tax payer, the service and level of service that should be expected from the pertinent departments, as well as increasing awareness in relation to tax obligations.
NATIONAL INVESTMENT FUNDS
Government has decided to establish the National Investment Fund to serve as a means of long-term investment for Malta by creating new forms of revenue for the Government in order to decrease Government’s dependence on direct and indirect tax revenue from Maltese citizens.
MORE COMPETITIVE MARKETS AND PRICE STABILITY
Government will reform the Consumer and Competition Division and establish the Fair Trading Authority and strengthen the Price Watch mechanism as well as introduce a more efficient and effective mechanism in order to keep price inflation under control.
ASSISTANCE TO FAMILIES
Government shall provide direct financial assistance in order to keep any increases in utility bills to a minimum. The amount of assistance will depend on the size of the family.
RESERVE FUND AS AID TO ENTERPRISES
Government has established the Reserve Fund as Aid to Enterprise of €2.5 million for entities that may face difficulties.
COMMERCIAL VEHICLE REGISTRATION TAX REFORM
Government shall carry out reform in the registration tax and licensing of the commercial vehicles. The new system will promote Euro 5 and 4 commercial vehicles which are regarded as the least polluting and hence will not attract any registration tax. On Euro 3 and lower-standard vehicles, registration tax will be levied in relation to weight not to value. Licences under the new system will also take the Euro standard into consideration. A transition period of four years shall be allowed before new licence rates become effective in order for business owners to be given a chance to renew their heavy vehicles.
In the coming year Government shall be investing €60 million in IT systems and new equipment in order to increase efficiency and quality of service in the public sector.
TAXATION OF PROPERTY
The option to pay a maximum tax of 35% on the gain resulting from a sale of immovable property situated in Malta in lieu of the final tax of 12% on the transfer price, has been extended to 7 years from date of purchase for the years of 2010 and 2011 only.
USE OF URBAN PROPERTY
In order to encourage the restoration of historical buildings or scheduled Grade 1 properties a refund of 15.2 per cent on the total expense shall be granted.
THE CREATIVE ECONOMY
The Government is also proposing a number of incentives to promote creativity targeting mainly the ICT, films, arts and design and the performing arts sectors. Incentives will also be introduced including:
- Fiscal benefits to Maltese authors to publish their literary work;
- Tax credits to cover costs on computer animation, special effects, films, TV programmes and production services;
- Fiscal benefits for costs incurred on digital media products and sound recording houses;
- Fiscal incentives to students undertaking studies in a recognised tertiary education institution whether locally or abroad.
ALLOWANCES TO CHILDREN LIVING IN RESIDENTIAL HOUSES AND WITH FOSTER PARENTS
Foster parents will have an increase in the Child in Care Benefit from €40 to €70 per week. Furthermore the age for assistance will increase up to 21 years for those youths who are still studying or following an ETC approved training program.
RECOGNITION OF ALIMONY ESTABLISHED BY FOREIGN COURTS
Income tax deductions are currently available in respect of alimony payments between spouses when established by the Maltese Courts. These tax exemptions and deductions will now also apply when the alimony has been established by foreign courts and upon approval by the Commissioner of Inland revenue.
ENERGY FROM ALTERNATIVE SOURCES
The Government is also allocating €16 million for waste management. It will also introduce a scheme offering grants on the photovoltaic systems with an allocation of €3.8 million and on solar water heaters with an allocation of €4.2 million. The schemes will grant eligible applicants up to 50% of their capital expenditure up to a maximum of €3,000 and 40% of the expenditure up to a maximum of €560 respectively. The Government is also drawing up a call for tenders for those interested in installing and operating systems which generate electricity through photovoltaic panels.
DEVELOPMENTS IN ADMINISTRATION OF ECO-CONTRIBUTION
Where packaging waste is concerned, the Government is prepared to give refunds or exemptions to those producers who are bearing part of Malta’s national obligation in so far as packaging waste is concerned. It will also introduce a pilot concept with regards to the administration of the eco-contributions. Three legal notices will be published for final consultation.
The Government will establish a Working Group to analyse the actual state of the environmental sector and draw up a strategy with a set of recommendations for its development. The Government will also shortly be introducing Smart Meters in houses and business sectors, with the industry having first priority.