EU wants Malta to reduce tax burden

The European Commission has given Malta good marks overall for its plans to reach the so-called Lisbon targets but it expects the island to reduce the tax burden on labour as one of its priorities this year.

The Commission's assessment of Malta's plans within the Lisbon Strategy, known as the National Report Programme, was published on Wednesday in Brussels together with the assessments for the other 24 member states.

The EU wants to make its economy more dynamic and competitive and has identified specific targets to be reached by its member states.

The Commission's overall view of the Maltese NRP is positive: "Malta's NRP identifies and responds to the main challenges facing Malta and is clear and based on a good analyses of the current situation, with ambitious objectives and concrete measures".

However, the report states that the measures taken do not in all cases appear sufficient to achieve the objectives, while prioritisation and coherence across policy areas is not always evident.

The Commission agrees with the NRP's aim to retain more people in employment and expand the labour market, mainly by increasing employment rates for women and older workers, which are particularly low at 33.7 and 32.8 per cent respectively. But, as one of the priorities that Malta should work on in this sector, the Commission highlights the need "to reduce the tax burden on labour and make work more attractive through a comprehensive review of the tax and benefit system".

Among the strongest points in Malta's plan and highlighted by the Commission is the emphasis on improving human capital by raising educational levels and increasing participation in training and lifelong learning. Another positive aspect is the stress on environmental sustainability.

The report however says that Malta needs to immediately give further attention to the strengthening of competition and improving the regulatory system.

It also notes that the NRP does not set an overall target for research and development expenditure.

"The policy objectives presented are appropriately ambitious, though the reform measures outlined may not be fully sufficient to deliver them. Synergies among the measures are not clearly identified, which may raise difficulties in implementation."

The lack of investment in research and development is highlighted as one of Malta's biggest problems.

"Research and innovation policy has a low profile in the NRP. While a target for public R&D investment at 0.2 per cent of GDP is presented for 2007, the NRP does not include an integrated R&D strategy aiming at an overall R&D target for 2010. Although the need for a strategy on innovation is recognised, the schedule and process for developing one is not clearly set out."

A recent EU innovation scoreboard showed Malta at the last position among EU member states and the lack of investment of R&D was one of the main reasons.

The conclusions of the report are now expected to be discussed by the EU heads of state at their next summit in March. Following adoption, the Commission will be working together with member states to achieve the targets and will review progress in a year's time.