The Maltese Prime Minister Lawrence Gonzi has introduced a number of tax changes
in his 2009 budget, which is set to reinforce Malta as an ‘eco-island’
with EUR152m of investment into environmental projects and alternative energy
incentives. The main rates of personal and corporate income tax are to remain the same.
The tax changes, which include the reform of transport taxation, will create
a EUR98.8m deficit in 2009, higher than was previously planned. The budget will
be balanced in 2011 rather than 2010 due to the current financial situation.
Contrary to initial concerns during the first quarter of 2008 where inflation
was fuelled by oil and commodity prices, forecasts now anticipate the Maltese
economy will experience deflationary pressures within the next year.
The Prime Minister has increased tax-exemption levels in an effort to further
increase consumers’ disposable income and maintain consumer confidence.
The amendments to the tax bands are as follows:
- For single computation: The first band will be raised by EUR350 making
the tax-exempt amount EUR8,500. The 25% and 35% bands will be raised by EUR500.
- For joint computation: The first band will be raised by EUR500, making
the tax-exempt amount EUR11,900. The 25% and 35% bands will be raised by EUR700.
Gonzi has also proposed income tax breaks for mothers who gave birth after
2007 and have since returned to work. Under the new budget mothers will receive
one-year income tax exemption; mothers who have returned to work within five
years of childbirth will receive one-year income tax refunds for every child
under 16.
The Maltese government has reduced penalties for late payment of income tax
and VAT: penalties for late payment of income tax and VAT are to be reduced
from 12% to 9% per year; the monthly rate is being reduced from 1% to 0.75%,
effective from January 1.
A ‘hotel tax’ of EUR0.50 per day will be charged on stays in hotels and
collective accommodation effective from 2010. Collected revenues will be used
to offset tax incentives being paid to low-cost airlines.
As part of Malta's environmental policies, tax will be increased by EUR0.35
per litre of petrol and EUR0.2 per litre of diesel. An additional levy of EUR0.25
and EUR0.50 will be imposed on traditional light bulbs and neon tubes respectively.
The increased revenue will be allocated to grants to subsidise the use of energy
efficient sources such as solar water heating systems, photovoltaic systems,
roof insulation and double-glazing. Under the new budget plastic bags will also
be subject to a EUR0.15 eco-tax.
Tobacco products will also see increases in taxation: excise on tobacco and
cigarettes will be subject to an increase of EUR0.20 per packet with immediate
effect.
In an effort to increase government revenues excise duties on alcohol are to be reduced
from January 1 to deter people from
going to Sicily to bulk buy.
Under a welfare-to-work scheme, those unemployed for more then five years will
be required to work a minimum of 30 hours per week in the community and will
receive 75% of the minimum wage from January 1. 6.4% of Malta’s populace
is registered unemployed and the government hopes they will be able to cut back
on expenditure on unemployment benefits with this plan.
Vehicle registration tax has been altered greatly within the new budget. Those
owning vehicles up to 1000cc will receive 44% reductions in vehicle registration
tax and medium sized cars will receive 28%. However, larger, more powerful cars
will be taxed an additional 25% to 45%.
VAT on car registration is being abolished, while a minimal tax on imports from
the European Economic Zone and non-EU member states is being introduced. There
will be extra weighting for diesel cars with particulate matter higher than
5.0mg/km. Vehicle licences will also start to rise marginally for cars over
seven years old, particularly in the case of diesel powered cars, as part of
a measure to discourage the use of older cars. The Maltese government has also
agreed to introduce subsidies of 15.25% for those purchasing push bikes.
The vehicle registration tax reform is based on the ‘polluter-pays’
principle and on congestion created. The reform will be enacted in two phases:
firstly the changes will be introduced for non-commercial users and followed
later by commercial vehicles subject to local market conditions and research
into its economic effect.
Finally, the PM also announced plans to completely privatise Maltese Shipyards
and yacht marinas. Enemalta’s petroleum operations will also be privatised.
According to Finance Minister Tonio Fenech, Malta will experience an economic
slowdown but this is expected to be no worse than in other areas of Europe.
The European Commission is concerned however, that the deficit ratio is estimated
to increase to 3.8% of GDP, giving the Maltese government less leeway to adapt
to future developments in the global economic crisis.
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