Malta's 2025 budget has recognised the importance of quality over quantity, as it remains a fundamental annual financial planning exercise aimed at reviewing taxes, subsidies and social benefits; allocating funds for ministries and government projects and forecasting government borrowing needs.
However, critics argue that this generous budget should be developed within the framework of a comprehensive strategic plan with a broader, long-term outlook. Based on short-term strategy, it misses an opportunity to address significant challenges impacting overall well-being and the country's competitiveness and attractiveness.
On the other hand, party apologists remind us how the widening of tax bands make good for the cost of living and point out to the inherent quality of life that the budget now bestows. For example, the tax refund paid in the past years, ranging between €60 to €140 per taxpayer will again be paid to individuals earning less than €60,000. In a major boost to disposable income, the government is effectively cutting income tax by adjusting the tax bands in the three tax categories - single, married and parent. These unprecedented cuts will cost the government €140m.
Certainly, major problems prevail such as traffic jams and surely these will not disappear on 1 January. Many laud the minister of finance for such a generous budget helping the middle class and pensioners. Yet, nothing tangible was proposed to halt the construction mayhem or propose concrete efforts to cut LNG and diesel usage so as to protect our life enjoyment and maintain clean air.
Various unions, the Chamber of Commerce, and other associations shared numerous comments. However, there was notable silence from the members of the MCESD. Starting with MUMN (union of nurses) it welcomes the revision of the tax bands, which will definitely leave a positive impact on the spending power of all the workers in Malta and Gozo.
Those paying income tax at the single rate will not pay any tax on the first €12,000 earned. In the married and parent rates, the first €15,000 and €13,000 earned respectively will not be taxed. The 15% band will widen to €12,001-€16,000 at the single rate; €15,001-€23,000 at the married rate and €13,001-17,500 at the parent rate. Moving on to UHM (union of State workers) it stated that out of a full-time workforce of 285,988, there are 165,000 individuals earning low wages. Low-paid workers are making under €19,000 yearly, charged tax at the married rate; most probably they cannot cope until the end of the month.
GWU said that the budget placed "citizens at the heart of society" and welcomed new policies such as the Vision for Malta 2050, the Transport Master Plan and the Economic Migration Policy, which prioritise "quality over quantity".
Furthermore, the SME Chamber welcomes the widening of tax brackets for the lower income workers. It publishes a new survey showing what SME business owners currently face in their day-to-day operations. A new survey by misco of 432 small business owners on their opportunities and challenges showed that almost half of all respondents (43%) said employee shortages were the most pressing issue their business is currently facing.
This was followed by unfair competition at 22% and traffic congestion at 18%. Yet, in tandem with the British autumn budget, locally, we greet the introduction of Police Patrol and Community Support Officers and this measure increases police presence on the roads, with continuous work on police station renovations, and the way that long-closed police stations were turned into Community Police offices. MHRA (representing hotels) welcomed revisions in the wage regulation orders, emphasising the need for these changes to accurately reflect the realities of the hotel and restaurant business.
Additionally, the principle of equal pay for work of equal value must account for the nature of temporary workers in this sector catering for over three million visitors. Equally applaudable is the scheme to encourage pensioners to continue working and their income gradually excluded from taxable brackets.
Another welcome news on the corporate side is the fact that discussions continue with the European Commission with respect to measures resulting from OECD Pillar 2 flat minimum 15% tax for subsidiaries of groups with a €750m turnover.
Malta obtained a five-year derogation and plans to introduce relief on the 15% rate in the form of grants or tax credits (QRTCs).
Let us now compare and contrast reactions in London arising from the delivery of the first Labour government budget (following a landslide election last July). The budget reveals a £40bn a year in extra taxes amid minimum wage increases and other measures to partially cover an alleged black hole of £22bn in state finances inherited from Conservatives. This budget ushers a series of significant changes to the nation's finances that will affect virtually every household in the UK.
The Institute for Fiscal Studies had predicted that around 400,000 would have found themselves liable for Income Tax for the first time, with a further 600,000 moving up to paying higher or additional rates due to the freeze. For example, while Malta's tax-free band is €12,000, the UK position is £12,570 a year - this is known as the personal allowance. Above this threshold, earnings are taxed at a basic rate of 20%. Young workers across the UK will receive a record-breaking pay rise next year as the government phases in a major change to the minimum wage. The latter has changed such that workers aged 18 to 20 will see their hourly wage increase by 16.3% in April 2025, from £8.60 to £10. It marks the latest step in moving towards a single minimum wage rate for all adult UK workers, in a move that has long been called for by campaigners.
A solid capital injection is planned towards the ailing NHS to cut waiting lists. The Chancellor said the measures were necessary to address the government's promise to "protect working people".
In conclusion both countries are striving hard to deliver quality measures to residents.
George M. Mangion is a senior partner at PKF Malta
gmm@pkfmalta.com