Revenue
During the first eight months of 2019, recurrent revenue increased by 16.3 per cent, mainly resulting from higher tax revenues.
The share of Government revenue from taxes reached 89.2 per cent of total recurrent revenue during the first eight months of 2019. Tax revenue increased by 13.1 per cent, reaching €2,846.3 million during the period under review, mainly underpinned by developments in direct tax revenues, which increased by €213.8 million, while revenue from indirect taxes increased by €115.6 million and non-tax revenues increased by €116.6 million.
During the period between January and August 2019, proceeds from income tax increased by 16.3 per cent while social security contributions were 11 per cent higher. Developments in direct tax revenue reflect the sustained economic growth path followed over recent years as well as enhanced efficiency in revenue collection. Economic growth was particularly influenced by tax-rich components, in particular, corporate profits, a strong labour market performance and increased tourism earnings. Meanwhile, higher social security contributions also reflect the positive effect of various Government initiatives in the labour market, namely measures encouraging female participation in the labour market and reforms in social security including the taper of benefits and making work pay which allowed for claimants to move from dependency on social benefits to join the labour market. During the eight months to August 2019, revenue from indirect taxes increased by 11.4 per cent, reflecting higher revenue registered in all the three components making up indirect tax revenue.
Revenue from Value Added Tax (VAT) increased by €98.5 million, supported by increases in tourism spending and household consumption.
Meanwhile, revenue from Customs and Excise Duties and Licences, Taxes and Fines increased by €9.3 million and €7.8 million, respectively. Higher revenue from customs and excise duties largely reflects higher proceeds from petroleum, cement, tobacco and machine-made cigarettes. Furthermore, higher receipts from licences, taxes and fines mainly reflect higher proceeds from gaming taxes and annual circulation licence fees.
Non-tax revenue mainly comprises grants, fees of office, the transfer of profits generated by the Central Bank of Malta and reimbursements. During the eight months to August 2019, non-tax revenue increased by €116.6 million mainly reflecting higher revenue amounting to €117.6 million from European Union grants and mirroring payments on behalf of the EU with respect to projects co-financed within the 2014-2020 financial framework. Miscellaneous receipts increased by €11.8 million confirming higher premium receivable from the sale of Malta Government Stocks. Revenue from rents was €5.7 million higher, largely reflecting increased revenue from rents of commercial tenements. Meanwhile, revenue from dividends from investments declined by €11.9 million, being mainly underpinned by lower revenue from dividends from public limited companies and to a lesser extent, by lower receipts from the Identity Malta Agency. Furthermore, revenue from the transfer of profits generated by the CBM declined by €8.0 million. These developments are within the trajectory estimated for 2019.
Expenditure
Total Government expenditure increased by 13.1 per cent during the eight months to August 2019, as recurrent expenditure increased by €271.4 million and capital expenditure increased by €100.2 million. Interest on public debt declined by €12.6 million.
Recurrent expenditure is classified under four categories that include, Personal Emoluments, Operational and Maintenance Expenditure, Programmes and Initiatives and Contributions to Government Entities.
Of the increase in recurrent expenditure, 60.2 per cent was attributable to the increases in the Programmes and Initiatives component. The Programmes and Initiatives component refers to expenditure that includes 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 Programmes and Initiatives increased by €163.3 million, mainly reflecting a higher contribution to the EU budget on account of seasonal differences in the timing of when payments fall due in 2019 compared to 2018, as well as due to an increase in Malta’s 2019 forecast Gross National Income (GNI). Higher outlays were also recorded towards the State Contribution (which also features as revenue) and on social security benefits, in particular, retirement and widows’ pensions. It is noteworthy that higher outlays towards social security benefits also reflect seasonal conditions in the timing of payments. Higher expenditure in respect of the extension of the school transport network, a transfer of €12.9 million to the Contingency Reserve Fund, as well as higher outlays towards urban landscaping and on medicines and surgical materials were registered.
Contributions towards Government Entities include the funding of Government entities, Parastatals, Corporations and Authorities. Outlays in this expenditure category amounted to €319.8 million for the period January to August 2019, recording a €48.1 million increase over the level recorded during the same period last year.
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 eight months to August 2019, this category of expenditure increased by €44.0 million and stood at €585.2 million, mainly underpinned by higher outlays directed towards the health, education and national security. Operational and Maintenance expenditure, which includes payments for utilities, contractual services, materials and supplies, transport and rent, increased by €16.0 million to €136.7 million during the first eight months of 2019.
The nomenclature of Ministries and the cost centres referred to in the government’s Economic Update reflect the allocation of portfolios and assignment of responsibility for Government Departments and Government Entities.
As such, a direct comparison with data of past years is not always possible.
Social Security Benefits comprised 25.1 per cent of Government recurrent expenditure during the first eight months of 2019, remaining the major component of Government’s total recurrent expenditure. Contributory benefits make up 82 per cent of social security benefits that include retirement pensions, while the remaining 18 per cent consist of non-contributory benefits, mainly social assistance, old age pensions and children’s allowance. Welfare payments reached €669 million during the eight months to August 2019. Contributory benefits increased by €21.6 million, largely reflecting higher outlays towards retirement pensions. Meanwhile, non-contributory benefits declined marginally to €119.7 million.