Malta: Decline in tax revenue shows extend of pandemic impact

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Total tax revenue in 2020 decreased by €317.9 million over the previous year, amounting to €3,973.8 million, the NSO said today. This sheds further light on the adverse economic impact of the pandemic, as well as Government measures aimed at mitigating the
crisis, particularly the tax deferral scheme.

Indirect taxes amounted to €1,420.3 million or 35.7 per cent of total tax revenue, a decrease of €218.2 million
from 2019. This drop was mainly triggered by lower Taxes on Production (€134.3 million), following declines in
duty on documents (€62.5 million) excise levies (€53.4 million) and motor vehicle registration tax (€11.9 million).

Furthermore, Value Added Tax (VAT) also dropped by €83.2 million over the preceding year. The second largest decrease was recorded in direct taxes, which declined by €140.6 million, for a total of €1,712.5 million, equivalent to 43.1 per cent of total tax revenue. The two key components of direct taxes, namely Personal and Corporate Income Tax were also signifi cantly aff ected by the pandemic. Corporate Income tax declined by €159.9 million over 2019, while Personal Income Tax registered an increase of €25.6 million, though at a slower pace when compared to previous years.

Social contributions paid by employees, employers and self- and non-employed persons represented 21.2 per
cent of total tax revenue in 2020, standing at €841.1 million. An increase of €41.0 million over 2019 was registered,
refl cting the resilience of the labour market.

The overall tax burden denotes the total amount of taxes and social contributions, expressed as a percentage of GDP. In 2020, the tax burden for Malta was 30.4 per cent of GDP, which reflects a decrease of 0.2 percentage points when compared to the total tax burden of 30.6 per cent of GDP recorded in 2019. Over the past 10 years, the total tax burden has been consistently above 30 per cent of GDP, with the lowest rate recorded in 2020, while the average tax burden for the 1995 to 2020 period stands at 30.7 per cent.

By the end of last year, direct taxes (which also include Capital taxes) amounted to 13.1 per cent of GDP, compared to the share of indirect taxes which stood at 10.9 per cent. Meanwhile, the share of Social contributions stood at 6.4 per cent of GDP, increasing by 0.7 percentage points over 2019.

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