Maltese workers pay less tax than other Europeans

The Maltese people are paying lower taxes than they were doing a few years ago and workers are much less taxed than their EU counterparts.

This is quite an achievement in the circumstances

In 2010, Malta cut the tax burden by one per cent of GDP over 2009 and managed to keep taxes paid on labour, both by employees and employers, to the lowest levels in the EU, according to the latest figures on the taxation trends released in Brussels yesterday.

According to EU officials, the lower taxes in Malta were the result of incentives introduced by the Maltese authorities over the past years and were making the country more competitive when compared to the other 26 member states.

“Despite the recession and economic downturn, revisions of income tax bands and the introduction of incentives, particularly to industry and small businesses, have reduced Malta’s overall tax burden,” one official said.

“While in these difficult times many member states had to revise their taxes upwards, particularly those on consumption, Malta managed to lower its tax intake in 2010 while slashing its deficit. This is quite an achievement in the circumstances,” the official added.

According to Eurostat, Malta’s overall tax burden in 2010 – which takes into account all tax revenue by the government emanating from labour, consumption and businesses – stood at 33.3 per cent of GDP, one percentage point below that of 2009.

The Maltese were taxed a full five percentage points (5.1 per cent) less than the average EU citizen, which, in 2010, faced a tax burden of 38.4 per cent.

The EU’s statistics office said thattax on consumption (VAT) in Malta also remained among the lowest in the EU.

While, on average, in 2012 the standard VAT rate in the EU stood at 21 per cent, Malta’s remained at 18 per cent.

But the island’s best results were attributed to the low amount of taxes paid on labour or the implicit tax rate on labour – the ratio between taxes and social contributions paid on earned income and the cost of labour.

According to Eurostat, at 21.7 per cent, Malta had the lowest implicit tax rate on labour among member states in 2010. This means that Maltese employees and employers were paying much lower taxes than their EU counterparts who, during the same year, forked out 33.4 per cent of all their earnings to the state.

The latest EU statistics show that the lowest taxed EU citizens in 2010 were the Lithuanians (27.1 per cent), the Romanians (27.2 per cent) and the Latvians.

The Danes (47.6 per cent) and the Swedes (45.8 per cent) had to pass on the highest amount of their earnings to the public coffers.

When it comes to VAT, the highest standard rate was being levied in Hungary (27 per cent) and the lowest in Luxembourg (15 per cent).

Over the past year, particularly due to the debt crisis, the average standard VAT rate in the EU increased by three per cent.

The average top personal income tax rate in the EU also increased in 2012.

The highest rates on 2012 personal income were observed in Sweden (56.6 per cent), Denmark (55.4 per cent) and Belgium (53.7 per cent) and the lowest in Bulgaria (10 per cent) and the Czech Republic and Lithuania (both 15 per cent).

Malta’s highest personal income tax rate stands at 35 per cent.