REVENUE

During the first eight months of 2015, recurrent revenue increased by €235.6 million, to reach €2,222.4 million. The increase was mainly the result of higher tax revenues, and non-tax revenue.                                     

Value Added Tax

Receipts from VAT during the January to August 2015 period amounted to €440.6 million, thus increasing by €18.1 million when compared to the January to August 2014 period. Alongside a more pronounced consumption pattern evident in the Maltese economy, these developments partially reflect higher expenditure by foreign tourists in Malta during the period under review.

Income tax

When compared to the same period of 2014, revenue from income tax receipts during the first eight months of 2015 increased by €64.9 million to reach €694 million. This was mainly attributable to the positive developments in the international financial and business sector, the domestic labour market and the property and financial services sectors.

Social security

Developments in the domestic labour market also supported the increase in revenue from social security contributions which, during the first eight months of 2015, increased by €19.9 million to €443.4 million. The positive developments in social security contributions reflect the strong increase in the female participation rate underpinned by the positive impact of the policies in place intended to encourage the involvement of women in labour markets. They are also supported by the pension reform initiatives legislated in 2006, resulting in a more dynamic increase in the maximum pensionable income and a lower number of retirees, reflecting the increase in retirement age.

Customs and Excise

Receipts from customs and excise duties increased by €63.3 million to €160.2 million. The increase was mainly due to higher revenue from excise duty on petroleum as Enemalta continues to pay its arrears. In addition, higher proceeds were also received from excise duty on cigarettes and cement.

Licences, taxes and fines

When compared to January to August 2014, revenue from licences, taxes and fines increased by €19 million in the corresponding 2015 period, reaching €180.3 million. This increase is mainly on account of higher proceeds from duty on documents reflecting the measures announced in the 2015 Budget.

Non-tax revenue

Non-tax revenue, which mainly comprises grants, the transfer of profits generated by the Central  Bank of Malta (CBM), fees of office, and rents, increased by €50.3 million in the first eight months of 2015 to reach €304 million when compared to the corresponding period in 2014. This increase was mainly underpinned by significantly higher revenue from European Union grants.

Citizenship

Revenue from fees of office increased by €4 million, to reach €29.2 million mainly as a result of proceeds from the Individual Investor Programme (IIP) and an increase in revenue from guarantee fees. These increases were being offset by a decline in revenue under this category of revenue as fees which were previously collected by the land and public registry and by the Passport Office are now being collected by the Identity Malta Agency, with the latter passing these revenue to Government in the form of dividends. Therefore, these revenue streams will now feature under dividends on investments.

EXPENDITURE

During January to August 2015, total government expenditure, including both recurrent and capital expenditure, as well as interest payments on public debt, increased by €166.7 million to reach €2,363.4 million. This increase was mainly due to higher recurrent expenditure and also increases in capital expenditure.                                                                        

Programmes and Initiatives

The Programmes and Initiatives category increased by €83 million to €1,189.2 million. The increase was on account of higher spending on social welfare, education, health, tourism and payment of own resources. More specifically with respect to social welfare, higher outlays were recorded in respect of social security benefits (largely retirement pensions), towards a one-time additional bonus to compensate those employees, pensioners and other beneficiaries who did not benefit from the reduction in income tax, and towards the State Contribution which also features as revenue.

Higher outlays were also recorded in respect of medicines and surgical materials, the provision of a spare capacity for electricity, support to Church schools, and the provision of free child care. Increased expenditure was also recorded in respect of the MTA route development. On the other hand, lower outlays were recorded towards students’ maintenance grants and towards the transport

Salaries

Government salaries increased by €23.1 million to €450.2 million when compared to the corresponding period of the previous year. Higher personal emoluments were mainly recorded in respect of salaries and wages, overtime and allowances primarily in the health and education sectors.

Government entities

Funding for government entities including parastatals, corporations and authorities reached €197.8 million during the period under review, thus representing an increase of €25 million when compared to the same period a year earlier. Developments in this category mainly reflected higher outlays towards post secondary and tertiary education and the subventions towards the Water Services Corporation and the Engineering Resources Co. Ltd. Higher allocations were also registered towards the creative economy and towards Karen Grech Rehabilitation Hospital.

Social assistance

Around 30 per cent of Government’s total recurrent expenditure consists of retirement pensions, children’s allowances and social assistance.  During the first eight months of 2015, welfare payments reached €569 million, as contributory benefits increased by €44.8 million while non-contributory benefits were €6.8 million lower than the comparable period in 2014.

Capital expenditure

Total capital expenditure increased further by €17.3 million to €271.4 million during the first eight months of 2015. The increase in expenditure was due to higher infrastructural and social capital outlays. The share of infrastructural investment in Government’s total capital programme increased by 5.4 percentage points to 64.2 per cent, while the share of spending towards productive investment decreased by 5.5 percentage points to 16.8 per cent. Furthermore, social capital outlays made up 19 per cent of total capital expenditure in the January to August 2015.

Infrastructural investment

Infrastructural investment recorded an increase of €24.9 million, reaching €174.3 million during the January to August 2015 period when compared to the same period a year ago. This increase was largely the result of a €25.5 million increase in capital outlays with respect to waste water treatment infrastructure which increased to €33.8 million partly due to outlays on the autoclave animal waste facility, together with an increase of €20.9 million in capital outlays towards several infrastructural projects co-financed by EU funds.

Higher outlays on infrastructural investment were also registered in relation to acquisition of property for public purposes, which were partially offset by lower expenditure towards road construction and improvement and the integrated flood relief project as funded by EU Cohesion Funds, which cumulatively registered declines of €16.6 million.