While Malta's Finance Minister Tonio Fenech has not ruled out the possibility of income tax cuts in the upcoming government budget, a sudden drop in tax receipts, and a slowing economy, make the prospect look dim.
Fenech told a press conference that while it is too early to dismiss tax cuts, the deteriorating economic situation, both globally and domestically, means that the government may have to think first about shoring up its own financial position.
However, he rejected suggestions that the government was lining up an "austerity" budget containing spending cuts and possible tax increases.
"Basically, we have to be cautious not to take decisions that put us in a straitjacket and that not only derail the objectives we have but also throw us into more specific problems," he explained.
A sudden fall in the profitability of some of Malta's largest companies, including the Bank of Valletta, has led to lower-than-expected tax revenues for the government.
Although a date for the budget has not been set, Fenech is expecting to announce it to parliament in late October.
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