Responding to Maltese Finance Minister John Dalli’s recent budget, the Maltese Institute of Management has welcomed the government’s commitment to reduce the fiscal deficit by 1% of GDP, though laments the use of higher taxation to achieve this.
The Institute argues that Dalli instead should have focused more on cutting government expenditure and fears the increase in Value Added Tax will only hurt the economy at a time of restrained rates of growth.
Though the MIM acknowledged that a hike in VAT was preferable to raising rates of direct taxation, it contends that this will translate into higher inflation which has implications for production costs, wages and the island’s overall competitiveness.
The MIM also claimed that one quarter of the additional revenue collected from the increased rate of VAT will be spent on a one-off compensation payment to workers.
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