Among the other proposals announced by the government in its pre-budget document released yesterday are a range of tax cuts, some of which may be adopted while others may be sidelined.
The document refers to the conclusions of the Tax Reform Commission, which carried out a comparative study of Maltese taxation compared to other taxation systems which shows, for instance, that the Maltese pay a higher percentage of their taxes through indirect taxes than other countries, and that the tax on labour paid by the Maltese is lower than that paid by other countries.
Having suggested streamlining company tax (see page 2), the proposals include:
Reviewing income tax bands
Thirty-seven per cent of tax payers do not pay any income tax while more than 20 per cent pay more than Lm400 per annum.
Proposals:
a. extending the zero band of income tax
b. delaying the onset of maximum rate of tax
c. lowering average tax rates, including the maximum.
Minimum NI contributions
It appears that the current NI contribution, Lm11.58 per week, is keeping many people working in undeclared economy, especially women.
Proposal:
Change the current minimum NI contribution to a proportional system, especially for part-timers.
Energy benefit
Proposal:
To be based on the following criteria:
• household income
• household size
• household consumption
• (would benefit 17,000 households)
Family tax incentives
To make taxation system more family-friendly through the introduction of family benefits – a flat rate non-taxable benefit for every child under care, independent of children’s allowance.
Cut airport taxes
The government document does not seem too keen on this policy option: it insists it should be retained at a sufficient level to enable it to attain its fiscal objectives. It warns there may be an increase in outbound tourism and the current account may suffer as a result; it concludes that cutting the airport tax may not be a priority for economic or fiscal policy as the other tax cuts proposed could be more preferable.