Revenue

During the first eight months of 2018, recurrent revenue increased by 6.2 per cent, mainly underpinned by higher tax revenue. The share of Government revenue from taxes stood at 91.7 per cent of total recurrent revenue during the first eight months of 2018.

Tax revenue increased by 9.4 per cent, reaching €2,516.9 million during the same period. This increase was mainly underpinned by developments in direct tax revenue, which increased by €136.1 million and revenue from indirect taxes which increased by €81.1 million.

The rise in tax revenue more than offset the decline in non-tax revenue of €56.8 million.

Of note is the fact that during the first eight months of 2018 income tax revenue increased by 10.5 per cent and social security contributions rose by 9.1 per cent. Sustained economic

growth and enhanced efficiency in revenue collection have supported fiscal developments to date. Economic growth composition was significantly influenced by tax-rich components, in particular corporate profits, a strong labour market performance and record tourism earnings. Meanwhile, higher social security contributions also reflect the positive effect of various Government initiatives in the labour market, namely measures to encourage female participation in the labour market and pension reform initiatives.

 

Indirect taxes

Over the period indirect tax revenue increased by 8.7 per cent, resulting from positive developments in all three components making up indirect tax revenue, as revenue from Value Added Tax (VAT) and Licences, Taxes and Fines increased by €40.0 million and €32.4 million, respectively, whilst revenue from Customs and Excise duties increased by €8.7 million.

Receipts from VAT increased in line with the strong growth in tourism spending and household consumption. Meanwhile, receipts from licences, taxes and fines increased, mainly underpinned by higher proceeds from duty on documents, annual circulation licence fees, gaming taxes and the motor vehicle registration tax. Revenue from customs and excise duties increased mainly as a result of higher proceeds from excise duty on petroleum and, to a lesser extent, machine-made cigarettes.

Non-tax revenue is mainly made up of grants, fees of office, the transfer of profits generated by the Central Bank of Malta and reimbursements.

 

Non-tax revenue

During the first eight months of 2018, non-tax revenue decreased by €56.8 million mainly due to a decrease of €43.4 million in revenue from European Union (EU) grants, when compared to the same period last year. The decrease resulted from the termination of the 2007-2013 financial framework for which reimbursements in respect of EU co-financed projects were received until 2017. Furthermore, a decline of €14 million in revenue from fees of office was recorded, reflecting the overall more moderate contributions anticipated from the Individual Investor Programme (IIP) during 2018.

Meanwhile, higher fees of office were principally recorded from the Residency and Visa programme, Fees for rights of use, environmental contribution and energy performance certificates.

Meanwhile, revenue from the transfer of profits generated by the CBM declined by €8 million. Revenue from reimbursements increased by €4.9 million during the eight months to August2018, mainly reflecting higher infrastructural fees and residential care for the elderly.

 

 

Expenditure

During the eight months to August 2018, total Government expenditure increased by 7.6 per cent, mainly underpinned by a €173.8 million increase in recurrent expenditure.

Capital expenditure increased by €26.1 million, while interest on public debt declined by €5.3 million during the period under review.

 

Recurrent expenditure

Recurrent expenditure is classified under four categories, namely, Personal Emoluments, Operational and Maintenance Expenditure, Programmes and Initiatives and Contributions to Government Entities.

Programmes and Initiatives refer to expenditure and social transfer payments made in respect of ad hoc programmes run by Government, as well as subsidies, payments and grants for the provision of services to citizens and to charitable and private institutions, but excludes operational costs of Government departments.

It also includes payments of own resources as contribution to the EU budget. During the first eight months of this year, expenditure on Programme and Initiatives increased by €93.9 million, mainly due to higher outlays on social security benefits, in particular, retirement and widows’ pension. However, additional outlays towards social security benefits also reflect seasonal conditions in the timing of payments.

Higher outlays were also recorded in respect of medicines and surgical materials, church schools, retirement care in private homes and expenditure related to cancer treatment.

The termination of Malta’s Presidency of the Council of the EU during the first half of 2017, contributed to offset in part these higher outlays, whilst lower outlays were also recorded in respect of EU own resources.

Contributions towards Government Entities include the funding of Government entities, Parastatals, Corporations and Authorities.

Outlays in this respect stood at €271.7 million during the period January to August 2018, registering a €30.3 million increase over the level recorded during the same period a year earlier.

Higher outlays were directed to the Malta Tourism Authority, the utilities sector, including the Water Services Corporation and projects related to energy and water management, the Financial Intelligence Analysis Unit (FIAU) and the Valletta European Capital of Culture 2018.

Personal Emoluments include all salaries and wages paid to elected officials and civil servants, as well as any bonuses and supplements paid to employees in excess of standard remunerations including any allowances and overtime payments.

During the review period, this category of expenditure increased by €39.5 million to stand at €541.2 million, mainly due to higher outlays directed towards the health, education and social sectors following sectoral collective agreements.

During the first eight months of 2018, Operational and Maintenance expenditure, which includes payments for utilities, contractual services, materials and supplies, transport and rent, increased by €10.1 million to €120.7 million. Higher outlays were mainly recorded with respect to the Ministry for Health, the Ministry for the Family, Children’s Rights and Social Solidarity, as well as the Elderly and Community Care.

At 27 per cent of Government’s total recurrent expenditure, Social Security Benefits continue to make up the largest share of Government recurrent expenditure down from 28.2 per cent during the same period in 2017. Around 81 per cent of the social security benefits are contributory benefits, mainly retirement pensions, while the remaining 19 per cent consist of non-contributory benefits, mainly social assistance and children’s allowance.

During the eight months to August 2018, welfare payments reached €647.7 million. Contributory benefits increased by €21.5 million, mainly underpinned by higher outlays towards retirement pensions.

Non-contributory benefits, meanwhile, remained at the level recorded during the same period last year, standing at €119.9 million.