The way in which economic growth is generated has implications for fiscal sustainability. Our efforts must therefore be continuous in ensuring that the economy is resilient, sustainable and grows progressively.

The role performed by taxation remains crucial for economic growth because taxation has the ability to shape both productivity and investment outcomes.

Evidence has shown that foreign-controlled enterprises within our jurisdiction are outperforming domestically controlled firms in a number of factors including profitability, productivity, and investment intensity. Through Malta's tax refund system mechanism, foreign-controlled firms are able to reinvest a larger share of profits. Simultaneously, Maltese-owned businesses are subject to an effective 35% corporate tax rate which is the highest corporate tax in Europe.

Evidently, the combination of Malta's corporate tax rate and the tax refund system have concerningly resulted in an uneven playing field and a competitive disadvantage for local companies.

This reinforces that Malta needs an internationally competitive tax framework and a tax framework which also encourages business development and value creation within the local economy.

In this regard, The Malta Chamber is calling for a reduction with the corporate tax rate from 35% to 25% for all business, with a further 5% reduction down to 20% for compliant business as a means to reward ethical business.

This reduced corporate tax rate may be supplemented if coupled with targeted incentives for high-potential sectors for exportation. The intention should be on promoting value-added investment and internationalisation.

The Malta Chamber also considers it crucial that the 2027 budget includes the introduction of a new system enabling the offsetting of different taxes against each other, thereby enabling the improved cashflow for businesses.

Of equal importance are family businesses. Family businesses are one of the local economy's most crucial pillars. This means that a tax framework which supports both intergenerational growth and investment is crucial.

All this will ultimately depend on proper succession planning.

In this regard, The Malta Chamber calls on government to introduce a lower tax and/or stamp duty attached, than the current one, to inter vivos transactions instead of at causa mortis stage. The introduction of such a measure would incentivise family businesses to commence succession planning as well as the transfer of movables/immovables/ assets during the inter vivos stage.

Furthermore, we note that excise duties add to industry costs, intensify inflationary pressures and ultimately drive unavoidable price increases for retailers and consumers. Therefore, government should refrain from increasing such excise duties.

An increase in Malta's tax deduction on qualifying R&I from 175% to 200% would further incentivise business investment in both commercially viable research and innovation.

Beyond this, tax enforcement systems need to build on the recent positive results while sustain constant and continuous modernising.

Only through such modernisation can the country continue to curb evasion and protect ethical businesses. Compliant and ethical businesses should be not commercially disadvantaged by non-compliant operations.

The challenge extends beyond the local scene.

We live in a world of complex geopolitical and economic realities. Malta is a small island state situated on the periphery of the European Union (EU). Such regulatory measures arising from the EU can be costly or otherwise disproportionate. Therefore, The Malta Chamber emphasises the importance of committing to the protection of tax autonomy by ensuring Member State flexibility against aggressive harmonisation, while securing national carveouts.

That is how The Malta Chamber sees a balanced tax environment expanding the economy's productive base, unlock domestic investment, strengthen local enterprises, strengthen competitiveness and create the right conditions for sustainable economic growth.

Nicole Sciberras Bray is a Policy Executive, The Malta Chamber of Commerce, Enterprise and Industry