Budget to cut deficit

A fiscal deficit reduced to 2.8 per cent of GDP through lower public expenditure and modest tax rises is the main aim of the government’s Budget for 2011 presented yesterday by Finance Minister Tonio Fenech.

In an attempt to reduce public spending, government departments will be required to improve their efficiency by at least two per cent while there will be less recruitment in the public sector and the government’s procurement methods will be reviewed.

Furthermore, a system of independent auditing will be set up to evaluate samples of persons receiving free medicines in order to combat abuse in this sector.

VAT on tourism accommodation is to be raised from five to seven per cent while excise duty on fuel will go up by 3c per litre. The tax on cigarettes and tobacco has been increased by three and four per cent respectively, the tax on local beer is up by 1c per 25cl bottle and the tax on spirits by 13 per cent.

Despite an emphasis on reduced government spending, expenditure on education and health next year will increase to €340 million and €378 million respectively.

A cost-of-living adjustment of €1.16 a week was announced and the supplementary allowance for low-income earners has been increased.

A scheme will be introduced under which anyone scrapping an old car will be entitled to a €2,000 subsidy when buying a small new car with low emissions.

The Malta Tourism Authority budget has been increased to €35 million and fiscal incentives for parents sending their children to private schools have been increased.

At a glance

VAT on tourism accommodation goes up to 7% from 5%

This may prove to be the most controversial move of the Budget and has already been criticised heavily by the Malta Hotels and Restaurants Association.

Car scrapping scheme

Up to €2,000 are up for grabs for every junk car traded in for a small, eco-friendly new car.

Increased tax rebate on private school fees

Parents of children attending independent schools will see their tax rebate increase by €200, for both kindergarten and primary and secondary school.

Increased tax on fuel, cigarettes, beer and spirits

Excise tax on fuels has gone up by 3c per litre across the board, that on cigarettes and tobacco by three and four per cent, the excise on spirits increased by 13%, while that on beer increased by 1c per every 25cl bottle.

€1.16 cost of living increase

As expected, the Budget announced a cost of living increase for 2011 of €1.16, down from €5.82 per week given for 2010.

More spending on health and education

The education budget has been increased by €32 million to €340 million while the health spend saw a rise of €13 million to reach €378 million.