Maltese Government Launches Pre-Budget Consultation

by Robert Lee, Tax-News.com, London

02 August 2005

The government of Malta is for the first time launching a pre-budget consultation which will detail the government's plans for the coming five years in several areas of the island's economic life, most notably in the areas of competitiveness and taxation.

“Excellence must permeate the essence of what we do across every sector of our life. We must seek to be the best in what we do and take pride in doing so. This attitude towards work and life is the guarantee of Malta’s success in front of the challenges that lie ahead of us," Prime Minister Lawrence Gonzi remarked on Saturday upon launching the consultation.

Mr Gonzi went on to add that:

“In doing so, this document provides the platform for decisions to be taken by business operators, investors and economic players and demystifies the secrecy which frequently surrounds the budgetary period.

"To our citizens, this document confers a vision to be embraced and an opening up of the path to be trodden by government. It breaks away from the micro-measures typically announced in budget speeches of the past, by announcing the macro areas in which government will seek to take budgetary measures in the future.”

The Prime Minister said that the document is the product of discussions both within government and also with a number of specialists in the public and private sector, who have all been working together since April under the Chairmanship of Parliamentary Secretary Tonio Fenech. Dr Gonzi also stated that the document incorporates many views expressed by the general public during the series of meetings he has had in Castille over the last two months.

The Pre-Budget Document is one of three important documents which will guide government action in the coming years, the other two being the National Reform Programme which is intended to address Malta’s competitiveness in terms of the EU’s Lisbon Agenda and the National Strategic Reference Programme, which will outline the strategic priorities for Objective 1 structural funds from the EU for the period 2007-2013.

Dr Gonzi continued:

“The single most underlying priority across this strategy remains competitiveness. Unless we bolster our competitiveness we cannot make a quantum leap in our quality of life."

"It is therefore crucial for the country to seriously tackle and take effective measures while allowing the private sector a free and level playing field, with the least possible administrative overheads and with more resources to deploy on productive investments. Similarly, government needs to roll-in and increasingly assume the role of the regulator without ever deserting its social obligations.”

According to the government, Malta's competitiveness will be boosted through a number of initiatives, including:

• Mobilising investment by first of all providing a stable macro-economic climate and also by directing direct public investment into the infrastructure which underpins private sector activity, primarily transport and communications networks, utilities, the environment and national heritage;
• By the continuous upgrading of the workforce skills through lifelong learning and education and by bringing forth the much needed reform in the education system;
• The reinforcement of an entrepreneurial culture which seeks to take advantage of business opportunities both local and foreign and by eliminating unnecessary hurdles and minimising government-induced costs while ensuring fair competition and regulation;
• Ensuring flexible markets to endow the economy with a capacity to adapt to emerging trends and developments;
• Boosting innovation especially in high-value-added, technology-intensive products and by channelling government support to strategic investment thrusts in identified sectors.

“We now need to place our money where our mouth is. We are delivering and we will continue to deliver through a series of reform some of which embarked and others due to be kicked off," noted Mr Gonzi.

Amongst other fiscal measures, government is proposing the undertaking of a review of the whole taxation system such that:

• Tax policy stimulates economic growth;
• The system is re-engineered from direct taxation to environment-related taxation,
• The government seeks to promote the uptake of the household rental market through tax incentives; and
• The reporting requirement is further simplified to lower administrative costs.

The setting up of a Task Force is being proposed to review the above and to present recommendations to Government by not later than June 2006.

The full text of the Maltese government's Pre-Budget Consultation can be found in the Tax News Resources section.

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