Minister of Finance Clyde Caruana presented his first budget – and the last of this legislature on Monday evening, with a strong emphasis on social and environmental elements.
The promise of free public transport for all is probably the most audacious iniatitive announced in the speech, and one in a series aimed at improving Malta’s green credentials and reducing its carbon footprint. This initiative will apply to all residents and holders of the Tallinja card. Other measures in this direction include the introduction of tax waivers for people who invest in residential properties built more than 20 years ago but have been vacant for seven years as well as properties in Urban Conservation Areas.
The budget also mentions new green spaces in urban zones and the creation or embellishment of parks and gardens, including San Anton. Urban greening projects will be developed in Zabbar, Qormi, Hamrun and Mosta.
Owners or new owners of hybrids and electric cars stand to receive increased benefits, with the grant for EVs going up to €12,000 if an old car is scrapped in the process.
Voluntary and sports organisations will be helped in investing in efficient energy.
The greening plans seemingly do not deter Malta’s continuous investment in infrastructure with a number of projects announced, including those financed through the EU’s Recovery and Resilience Facility. One of the heftiest investment in this regard is the €470 million allocated for industrial estates as well as another conspicuous allocation for new roads.
Budget 2022 is dotted with social measures, most notably the introduction of free medicines for patients who suffer from inflammatory illnesses, rare diseases and IVF patients. Bonuses for couples who have a child or adopt one increase by €100 to €400. The allowance provided for children with a disability is increased by €5 per week for a total of €1,560. The grant given for a carer to help a severely disabled persons, introduced last year, will go up from €300 to €500. Caruana noted how some 450 parents benefited from this scheme so far.
In a move destined to leave more money in the pockets of families, Caruana announced that income tax will be lowered on part-time (from 15% to 10%) and overtime. Regarding the latter, employees who get up to €20,000 will be paying a flat rate of 15% tax rate on the first €10,000 they receive from overtime work.
Tax refunds will be sent again next year, with cheques ranging from €60 to €140.
In parallel, income tax for working pensioners will be applicable only on work income, with this measure coming into force on a five-year time span.
Artists too stood to gain from Government’s plans with an income tax rate slashed to 7.5%, as well as through the introduction of a new methodology in which their income will be calculated over an average of three years for tax purposes. An increase in in-work benefit thresholds was also announced.
However, in parallel to the announced tax incentives, the Finance Minister promised a heavier hand against tax evasion.
The Cost of Living Adjustment (COLA) will increase by €1.75 per week, as per the established formula. This increase will be given to all workers, with over 95,000 pensioners receiving €5.
Popular schemes for first-time and second-time buyers and those buying a property in Gozo will be extended for another year while free childcare services will be extended to evenings and weekends for people working shifts.
The financial side of things
Questions will be certainly asked on the financial backing of this budget, with government is expecting to close off 2021 with a public deficit of €1.545 Billion, equivalent to 11% of GDP and with a public debt €8.56 Billion, which is equivalent to 61.32% of GDP.
In 2022 Government is forecasting a public deficit of €850 million which would be equivalent to 5.6% of GDP, with the public debt increasing to of €9.37 billion by end 2022 – that’s 61.8% of GDP.
GDP is forecasted to grow by 4.8% in 2021 and 6.5% in 2022. In the post-budget press conference, questioned on the sustainability of the proposed expenditure, PM Robert Abela said that such a Budget is possible by “having a dynamic, growing economy, by having careful spending, and by collecting the taxes owed.”