Malta Budget Highlights 2014
The 2014 Budget presented in Parliament by the Minister of Finance Dr. Edward Scicluna seeks to set up a fiscal policy with the target to reduce the deficit to GDP ratio to less than 3% whilst retaining the economy's momentum.
This budget aims to continue with the fiscal consolidation and economic sustainability whilst strengthening the social safety net and providing enough incentives for further investment and the creation of more jobs.
The budget focuses on six priorities namely
1) Expenditure should match revenue being generated
2) The reduction of energy costs
3) Making Work Pay to improve economic efficiency and effectiveness
4) Reduction in bureaucracy and waste of resources
5) Diversification in the industries and target countries with which Malta undertakes economic activity
6) Social services to be based on the concept of sustainability which ensuring that these are strengthened and improved.
Fiscal & Economic Review
During 2013 the economy is expected to grow by 1.2% in real terms and this is expected to improve to 1.7% in 2014.
In June the unemployment rate was at 6.7% which is equivalent to the rate of 6.4% in June of last year. By the end of June 2013, the labour force i.e. the total number of people employed plus unemployed stood at 189,620, an increase of 5,915 or 3.2 per cent over the level recorded at the end of June 2012. Meanwhile total employment increased by 5,134 or 3% to reach 176,862.
The twelve month moving average inflation rate stood at 1.6% in September 2013, compared to 2.3% in September 2012 and below the EU average of 1.9%. This resulted in a cost of living adjustment (COLA) for the year 2014 of €3.49 (2013-€4.08). Inﬂation is expected to average 1.7 per cent in 2013.
It is expected that Malta reduces its GDP to deficit ratio from 3.3% in 2012 to 2.7% in 2013 and 2.1% in 2014.
• An increase in excise duty on cigarettes, tobacco, fuel, cement, alcoholic drinks and beer.
• An increase of one cent excise duty on fuel shall be introduced in January 2014.
• An introduction of a refund on expenses on banderoles.
• An increase in car licence fees in respect of vehicles that were registered after 2009. Car licences for vehicles with emissions from 0 to 100 grammes shall remain the same.
• The personal tax bracket of 32% applicable to persons who earn up to €60,000 shall be reduced to 29%.
This tax bracket is applicable to single, married and parent rates.
• The parent rate of €9,300 shall be increased to €9,800.
• A tax allowance for parents who maintain a child in tertiary education is to be extended to children up to the
age of 23 years.
• In respect of part-timers, part time withholding tax limit of €7,000 has now been increased to €10,000 and
€12,000 in case of part-time self-employed persons.
• Part-timer self-employed persons are now allowed to employ up to a maximum of two employees and continue to avail of the 15% withholding tax rate.
• Employees who earn the minimum wage shall not have any tax burden. This will also apply to pensioners who
do not exceed the minimum wage threshold.
• Pensioners who continue to work as self-employed on a part-time basis shall be subject to a tax rate of 15%
in case that the total part time income does not exceed the minimum rate of social security contribution.
• The rate of income tax for footballers shall be reduced to 7.5%.
• Tax charged on auctions shall be removed.
• Interest due from stamp duty on a transfer causa mortis cannot exceed the duty paid.
• The gross rental income shall be subject to a final tax rate of 15%. Properties which are not registered and are rented out shall be subject to a final tax rate of 35%, and the said rental income shall be subject to penalties and interests which shall be introduced at a later stage.
• First home buyers who enter into the final deed of transfer in 2014 shall be exempt from duty payment on the first €150,000.
• It is now possible for private architects to evaluate a property which valuation may be used for tax assessment purposes.
• A pilot project is to be introduced to identify government properties situated in Valletta.
• As from January, persons who declare VAT on time and effect the respective payment on time, shall have their VAT amount deducted in full even if they would have older previous balances not yet settled.
• The penalty of non-filing shall be removed if a VAT return is submitted without a payment.
• The current interest rate on overdue VAT and income tax balances shall be reduced.
• Currently, self-employed persons who fail to pay VAT/Income Tax on time can be sent to imprisonment in case of a second default. An amendment will be introduced whereby in such a case the court shall have the discretion to either imprison or extend a fine of €2,000.
• Property developers who cannot provide proper evidence of work carried out on their properties will be subject to VAT on the construction estimate of that property.
• An introduction of the Investment Registration Scheme whereby persons who would like to declare funds, stocks and investments which are not declared in Malta or elsewhere, may declare these investments subject to a fine.
• An introduction of a Reporting Online Portal whereby persons may report other non-Maltese persons who undertake work or services in Malta without paying the necessary VAT and Eco-contributions.
• Reduction in water and electricity tariffs from 5% to 25% as from March 2014. Reduction in tariffs for commercial entities as from 2015.
• Stability in the prices of petrol, diesel and gas up to December 2013, and in the case of diesel, the prices shall remain unchanged up to end March 2014.
• Incorporation of the Malta Oil and Gas Corporation which shall act as the Government’s agency for the appropriate planning of the Government’s oil and gas exploration.
• Revision in the National Renewable Energy Action plan to ensure that policies and measures are in place to reach the objectives associated with renewable energy.
• Introduction of a pilot project for a system of intelligent street lighting. The project will be introduced in Gozo and for 12 km road stretch in Malta.
• Initiatives to have public buildings becoming energy self-sufficient. In this respect, a pilot project will be launched in Siggiewi State School.
• Voluntary energy audit scheme for families to save on the use of water and electricity.
• €500,000 in subsidies for the installation of solar water heaters and insulation of roof tops.
• Launching of a campaign on water conservation while restoring and conserve the existing water storage facilities.
Employment Promotion Measures
• Formation and set-up of the Jobs+ committee and allocation of €8.3 million for the running of the Employment Training Corporation (ETC).
• Investment of €3.8 million to offer free child care centre services for employed parents or single parents who are employed.
• New service whereby parents may leave their children at school prior to the usual school time and simultaneously the children are provided with an adequate breakfast. This incentive supports parents who have to report early for work.
• Current income tax rebate of €1,300 for the payment of child care facility by working parents, will be increased to €2,000.
• As from January 2014, married women who are of over 40 years and decide to work and earn income lower than the minimum wage would permit their working spouse (husband) to benefit from the married rates of tax. At the same time, the income earned by the women would be ignored for the purpose of the tax computation. This benefit will be valid for five years.
• A guarantee to school-leaving youths with individual attention to integrate themselves in the working community. It is expected that 350 youths will benefit from this scheme with a payment of €1,440 for each individual.
• A scheme amounting to €350,000 as a work placement for apprentists. This will be complemented with a tax deduction of €600 for every work placement and €1,200 for every apprentice.
• Work and Training Exposure Scheme for Gozitan individuals and renewal of the Employment Aid Programme.
• €300,000 allocated for the Youth Entrepreneurship Scheme as announced during the Budget 2013.
• Employment and training for unemployed individuals aged between 45 and 65 years by granting a deduction of €5,800. Companies employing this kind of individuals would be granted a reduction in income tax up to 50% of the training expenditure undertaken up to a maximum of €400.
• Incentive for those individuals who have been unemployed for two years and would like to return to work. The unemployment benefits for these individuals would be reduced gradually by lowering the unemployment benefit as follows:
65% of the benefit for the first year.
45% of the benefit for the second year.
25% of the benefit for the third year.
The employer would be granted 25% of the unemployment benefit for every year, up to three years.
• Single parents currently on social benefits, would be given a credit between €200 and €1,000 when these undertake an intensive vocational training programme or full-time educational course.
Educational and Vocational Improvement Measures
• A pilot project to start introducing tablets in schools
• A sabbatical paid year for teachers in which they can improve their skills
• Stipends will be increased in line with the COLA increase and will also be provided for those who repeat a year.
• Investment of more than € 72 million to the University of Malta and the Junior College, amounting to an increase by 13% [€8.4 million].
Tourism, Investment Promotion, Sectorial and Transport Measures
• Launch of the Individual Investor Programme, a citizenship programme
• Allocation to the Malta Enterprise the sum of € 14.9 million for the promotion of private local and foreign investment
• Allocation to the Malta Tourism Authority the sum of € 38.5 million, an increase of 4%.
• Amendment of the Micro Invest scheme, whereby small enterprises and self-employed persons will be assisted by the eligibility of a tax credit of 45% of the expenditure, whilst those working in Gozo will be eligible to a tax credit of 65%.
• Short, Medium and Long Term traffic measures will be taken to improve traffic flow.
• A refund in respect of registration tax will be given, whereby € 3.5 million have been allocated to this process, which will be over 7 years.
• € 103.6 million are allocated for the investment and sustainability of the environmental and agricultural sectors.
• A plan for the maintenance and the management of the Family Park is being drawn. In this respect € 200,000 are allocated.
• Registration tax on cars and motors will be reduced.
• A vehicle scrap scheme will again be implemented, with an allocation of € 600,000 over 2 years.
National Security & Local Government Measures
• The national security is allocated the sum of € 139 million
• The new identity cards and e-ID will start to be issued throughout the next year
• Assistance to Local Councils to broadcast the Council meetings online.
Health Sector Measures
• Improvement of the management at Mater Dei and also improve stock management including the Pharmacy of your choice scheme.
• In cases where patients have to be cured in other countries, the government will now be paying for the flight of both parents accompanying their child.
• The government will introduce various measures to improve Health Centres, prevention clinics and health promotion.
• Chemotherapy services will be introduced in Gozo. A Day Care ward will be opened in Gozo as well as new services such as Pain Clinic, Rheumatology and Urology.
Social Services Measures
• The pensionable age will not be increased.
• The third pillar will be introduced for private pensions whereby fiscal incentives will be given to whom will invest in such pension schemes.
• Widows will continue to benefit from a full pension. An amount of €2.2 million has been voted for these pensions.
• Service penions will improved gradually. From 2014 the pension will be increased by €200, from €1,266 to €1,466. It is estimated that these measures will cost €1.5 million with 5,500 pensioners benefiting form such increase.
• From next year the yearly allowance given to the elderly will be increased from €300 to €500 and will be given to those with an age of 75 years and over.
• It was decided to exempt elderly and disabled persons from paying their share of the social security contribution as employers when such persons employ live-in carers.
• There will be an increase in the Disabled Child Allowance from €16.31 per week to €20 per week. 815 persons will benefit from this increase.
• The tax on the transfer of immovable property causa mortis will be removed for disabled persons who inherit properties.
Sports and Culture Measures
• The government is aiming to increase investment in sports. Capital projects will be given priority and these include the waterpolo pitch and football pitch in Birzebbuga, canopy in the Corradino Sports Pavilion, an upgrade to the national swimming pool and sport facilities in Gozo. An amount of €2.5 million has been allocated for this purpose.
• The Malta Dance Company will be established and €200,000 will be allocated for this purpose. Another €200,000 will be used to develop the Culture Hub. A further €150,000 will be allocated to help local bands.
• A film co-production fund will be set up and an amount of €1 million will be dedicated for this aim. The fund aims to assist and further develop the local film industry. A further €500,000 will be allocated over 2 years to help local cinemas adopt digital technology.
• Various measures will be introduced to help NGOs and promote voluntary work.
• It is the government’s intention to improve work conditions and eliminate abuse.With the assistance of unions and employers, a Workers’ Rights Charter will be prepared.
• From next year the honoraria of members of parliament will be paid pro-rata, based on attendance.