A pre-budget document to be released tomorrow will show that over a third of Maltese workers do not pay any income tax.
About 37 per cent of workers claim they earn under Lm3,100, the threshold for single persons, or Lm4,300 in the case of married couples. More than a fifth are subject to a tax bill of just over Lm400 per annum.
However, the much-anticipated document, to be unveiled by Prime Minister Lawrence Gonzi, will actually propose extending the zero band of income tax.
Middle-income earners will also benefit from a package of proposals outlined in the document, Parliamentary Secretary Tonio Fenech told The Times.
"Our objective is that everyone will benefit from our budgetary plans. When drawing up this document we took everything into consideration, especially the fact that rising oil prices have put a burden on many," he said.
Eight taxation measures will be proposed for discussion in the document, called Securing Our Future, before any fiscal measures are taken in the November budget.
Mr Fenech however made it clear that in the medium term, the government will continue shifting the burden of taxation from income to consumption. Malta already relies significantly on indirect taxation, which accounts for 45.1 per cent of total tax revenue, compared to the EU25 average of 38.2 per cent.
One of the proposals is to retard the onset of the highest rate of income tax, while a suggestion to lower the maximum tax rate from 35 per cent to 30 per cent has been shelved because it was felt that this would ultimately affect only those few who reach this bracket and the big companies, he said.
Mr Fenech explained that the Tax Reform Commission felt that introducing tax credits for SMEs could actually encourage firms to remain small. In fact, the commission agreed that differential tax regimes and discriminatory rates would introduce distortions and inefficiencies into the system. However other "interesting" measures will be proposed for the self-employed.
The report will highlight the fact that social security contributions in Malta yield comparatively little revenue - 6.9 per cent of GDP, less than half of the EU average. The government intends to carry out extensive revisions to its Social Security Act to ensure they are tailored to present needs, Mr Fenech said.
He insisted that any changes will have to be in line with the over-riding objective of maintaining a sustainable deficit below three per cent of GDP and not create any inflationary pressures that could somehow jeopardise Malta's prospects of adopting the euro in 2008.
No changes are expected to be proposed for vehicle taxation though the controversial Lm20 departure tax might be tweaked.
To minimise the impact of the fuel surcharge, the government is contemplating compensation to those suffering from certain medical conditions.
Turning to education, Mr Fenech said that in 2007, the government is committed to invest in infrastructure projects across all levels of further and higher education. These include the expansion of the Junior College and a heavy investment in the university faculties.
The pre-budget document will also probe the different ways of enticing more women to the job market. Among the envisaged measures is a financial scheme to support child care centres.
On the care of the elderly, the government is studying the financial and human resource implications of transforming state community homes gradually into nursing homes that cater for the needs of dependent persons.
Mr Fenech said that in an attempt to sustain the employment rate and increase labour market participation in Gozo, the island will be marketed as a centre for back-office operations.
The document touches upon several other sectors, including pensions, oil exploration and an outline oil disruption response plan.