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 pile of € 8.56 Billion, which is equivalent to 61.32% of GDP. Beyond 2021, Government is forecasting a real GDP growth of 6.5% in 2022 and 4.7% and 4.5% in 2023 and 2024 respectively. This means that in 2022 Government is forecasting a public deficit of €850 million which would be equivalent to 5.6% of GDP, with the public debt pile increasing to of €9.37 billion by end 2022 equivalent to 61.82% of GDP. Government forecasts that the public debt pile will remain above 60% of GDP for the foreseeable future in 2023 and 2024.

As the minister said in the budget speech, these forecasts are being done on the background of a very volatile situation. The rising energy prices and the possible rise in inflation can be the challenges for next year. Government could need to increase its expenditure to cushion the negative effects from all this, leading to a higher public deficit in 2022 than that forecasted.

Below please find the major Budget measures just announced:-

1. Social Measures

• Increase in pensions by €24 million, equivalent to €5 per week.
• A €100 increase in the bonus paid when a child is born or adopted from €300 to €400
• Those on Social Assistance will receive in full the cost of living adjustment and not 2/3rds
• The Carer at Home benefit will be increased from €6,000 to €7,000 annually.
• The subsidy rate of the Home Helper of your Choice will be increased from €5.50 per hour to €7 per hour.

2. Work

• A census on the workers’ skills to be carried out in 2022
• A training fund of €2 million to be setup and managed by the industry
• Workers who work in certain conditions, like, those working nights or weekends, will receive a €150 in-ward benefit if their basic annual wage does not exceed €20,000
• Income tax will be decreased on overtime. For those workers earning not more than €20,000 annually will be taxed at the reduced rate of 15% on their first €10,000 earned on overtime
• Pensioners who keep on working after the pensionable age, will see over a period of 5 years, that their income from their pension will not form part of taxable income.
• Income tax on part-time work to be reduced from 15% to 10%.
• The In-Work Benefit will be extended and so couples who both are working will benefit if they now earn €50,000 annually or less
• The Tax refund will be increased in 2022 to €60 – €140.
• The free childcare service will be extended for those working nights or weekends.
• The COLA adjustment will be of €1.75 per week
• Discussion on a separate mechanism will commence to arrive at a mechanism to cushion the effect of any increase inflation for the most vulnerable.

3. Education

• Students stipends will be increased by 10%
• Student Stipends will still be paid if students work up to 25 Hours per week.

4. Investments

• To cushion the effect of increased transportation and shipping costs, government will extend the subsidy on the rent of certain eligible businesses as these need to stock more than before to reduce their transportation and shipping costs.
• Group of companies can use the capital allowances linked to investment done, that where not used in 2020 and 2021 against their income tax from any other company in the group in 2021.
• Malta Enterprise will introduce a scheme whereby if a percentage of profit is invested in the businesses, such businesses will receive a tax benefit, as long as the investment is done over the span of 2 years from 1st January 2022.
• Government will be less lenient on reducing the interest due on the pending tax balances. From 1st June 2022 the interest rate on unpaid Income Tax and VAT Balances will be increased to 7.2%
• An investment of €470 million will take place in the Industrial Estates to modernise them.
• A strategic plan for the financial services industry is being setup. In January 2021 government setup MFSAC which is a consultative council on financial services in Malta with the aim of setting this strategic plan to protect the financial industry in Malta, consolidate and strengthen the various structures and systems and have the industry become more attractive. To this end, this strategy is being based on the simplification of the Regulatory Processes, consolidation on identity management, the reform of financial services laws and encouragement to have the best talent in the financial services industry.
• Malta Development Bank will extend the SME Tailored Facility to loans related to the green economy.
• The concession on the transfer of family businesses and so the reduction of the transfer tax from 5% to 1.5% will remain.

5. Environment & Sustainability

• Building contractors will be licensed
• Properties that have been built more than 20 years ago and have been vacant for more than 7 years or properties in urban conservation areas, will see that all capital gains tax will be exempt of the first €750,000 of the property price. First time buyers of these properties will receive a grant of €15,000. Gozitan first time buyers of these properties will receive a cash grant of €30,000. A grant on the VAT paid in relation to the expenses on these type of properties up to €300,000 in expenses will be given, for up to €54,000.
• Public transport will be free for all Malta residents from 1st October, 2022.
• Financial grant to incentivise electric or plug-in hybrid cars will be increased from €8,000 to €11,000. Grant when scrapping cars using combustion engines will be increased from €1,000 to €2,000.
• Malta Enterprise will launch a scheme that will help businesses change their vehicles working with combustion engines to electric vehicles. The scheme will cover a part of the price difference between combustion engine cars and electric cars.