In your opinion, what is the main message of this budget?
The tag line for this budget, sets out the vision and direction that the Minister together with his Cabinet colleagues have chosen to address during the forthcoming year. The focus is to create a better Malta that our future generations may enjoy and be proud of and there are measures that openly seek to address areas that have been a regular source of criticism levelled at government and its competent agencies. We can also see due importance given to the country’s continued modernisation, including the need to upskill and/or reskill our work force, better preparing them to capitalise on emerging economic strands in a post-COVID also to meet the challenges of inflation.
What are the key sectors being addressed?
The Environment features prominently in this Budget. Apart from schemes that shall aid the acquisition of PV cells, battery storage systems, reverse osmosis systems and heat pumps, interestingly enough the Minister has introduced the launching of a carbon credit trading scheme. These schemes usually cap emissions output and entities may then acquire credits to offset any emissions that extend beyond their capping. Malta has already transposed the EU ETS Directive in relation to aviation and stationery installations so a broader application of this Directive would be a logical progressions. The Government also announced plans to create more, green urban centres as well as the reforestation of a large tract of land in the South of Malta.
There is also a concerted effort to address shortcomings in the Transport Sector with incentives that seek to reduce transport emissions by increasing grants that shall be made available to persons acquiring new electric or plug-in hybrid vehicles. The scrappage scheme and exemption from registration tax and license fees on electrical and plug in hybrids has also been extended for a further 5 year period. The introduction of free public transport for all residents effective from October of 2022 is also a welcome measure that aims to reduce traffic from our already congested roads.
A number of property related incentives have also been announced to assist first-time property buyers and lessees that wish to acquire the property they rent.
The Construction sector is another industry that has been specifically addressed in this Budget. A number of incentives have been introduced that seek to balance the current over-development that we are seeing across the island. These include tax exemptions on the sale and/or purchase of vacant buildings within an Urban Conservation Zone. Incentives shall also be granted to developers who construct new buildings that respect Maltese architectural heritage. The Planning Authority shall also set up an Aesthetics Board to ensure a more harmonious approach towards construction. These measures may come a little bit late in the day to prevent the rampant and seemingly over-development that we are experiencing, particularly in some central areas, but are welcome measures nonetheless.
The business sector may also welcome the introduction of funds that will facilitate the commercialisation of technological products and incentives that will benefit companies that invest in technology, innovation and sustainability. Another interesting measure is the exemption from tax of profits that are ploughed back into a business. This is meant to incentivise business owners to reinvest profits into their business to fuel expansion and growth, as well as to stimulate upgrading of systems and/or machinery that should translate to better efficiency and enhanced output.
What, in your opinion, is the key message in this budget?
A renewed vigour when it comes to combatting tax evasion was a very strong and unequivocal message that came across. Taxpayers must be prepared to pay their dues and to do so in a in a timely manner. The need to modernise our tax system in light of the recent FATF grey listing and also in view of the drive towards a harmonised, global tax base rate was also referred to. Any competitive advantage that countries like Malta have managed to carve out in view of their ability to devise a transparent tax framework that is also instrumental in attracting FDI shall potentially be diluted as Malta adopts the OECD base rate model.
It is yet to be seen whether certain derogations based on turnover shall apply and if so how will entities falling below this capping be treated, yet I do believe that Malta’s tax refund system has run its course and we now need to reinvent ourselves and devise a new national strategy that shifts the focus on human capital and a refreshed legal and regulatory framework that can improve the ease of doing business in and from Malta and create new niches where we can rapidly develop the required expertise to excel as we have seen in the past particularly within the gaming sector.
In this regard, I do welcome the Minister’s focus on innovation but more may be required to be done to provide the necessary access to funding in the absence of venture capital and angel investment structures in Malta.
What do you think was missing from this budget?
I think that this budget is very broad in its reach and, although there is a marked focus on popular topics which have also been subject to criticism levelled at Government, there is also an impetus towards devising a new national strategy and equipping our work force to meet the challenges that the country will face as it re-starts its economy in the midst of economic upheaval that we are witnessing in neighbouring countries who are still battling the effects of the COVID pandemic.
This should also be seen in the context of the effects of the withdrawal from the EU of Great Britain, one of Malta’s traditional political allies and economic partners. What is missing in my mind is enhanced checks and balances that are imposed on our politicians who are entrusted with managing our tax money in the best interests of the nation.