Some tax relief planned

A pre-budget document to be released next month is expected to propose a number of tax relief measures aimed at boosting economic growth while keeping financial targets in sight, The Times has learnt.

The document is being finalised and will be submitted for Cabinet approval shortly. It will be followed up with a period of consultation with the social partners and the public before the measures are announced in the next budget, Parliamentary Secretary Tonio Fenech said.

Though keeping all cards to his chest, Mr Fenech said the government was considering easing the burden of some taxation provisions, especially bearing in mind the impact of the hefty electricity surcharge.

"The reform does not propose radical changes, though there will be changes," Mr Fenech said.

Last year's pre-budget document identified the government's priorities over a four-year period: growth in the economy, education and the environment. The upcoming document will be focusing more on specific aspects, Mr Fenech explained.

The document will detail the work carried out by the Tax Reform Commission which has drawn up a series of proposals dealing with company and personal taxation.

The commission has looked into a number of aspects such as the possible revision of the flat rate and income tax bands, and whether the 35 per cent corporate tax rate should be lowered.

"Many countries actually continued to adopt a progressive tax system. We also looked at lowering the 35 per cent personal income tax rate but relief will only be given to a few. We need to adapt the bands accordingly," Mr Fenech said.

In a bid to help them retain competitiveness, companies' tax structures will be amended and aligned with international developments.

"The government will retain the refund system but there will be conceptual changes, which can give a boost especially to the financial services industry and entice more business to Malta."

Mr Fenech underlined the importance of remaining in line with the set financial targets. While using taxation as an instrument towards enhancing economic growth, the government had to ensure it did not jeopardise the convergence plan.

The pre-budget document will also touch upon research and innovation, alternative energy and social inclusion.