Maltese taxpayers, particularly salaried workers, are still among the least taxed in the EU, but the island’s tax burden has been increasing steadily in the past years, according to Eurostat.
Maltese consumption taxes are more in line with the EU trends
Malta’s tax burden increased by almost a full percentage point (0.9 per cent) in 2011 when compared to a year earlier, according to the latest statistics on taxation trends in the EU.
With proceeds from taxes, both direct and indirect, reaching 33.5 per cent of GDP in 2011, Malta’s income from taxes increased by 6.2 per cent since the beginning of the millennium.
On the other hand, the average tax burden in the EU has gone in the opposite direction, shrinking by 1.6 per cent in the past 11 years.
Despite the increase, Malta’s tax burden is still much lower than the EU average, which in 2011 stood at 38.8 per cent of GDP.
According to the EU’s statistics office, in 2011 Malta kept its record when it comes to labour taxes.
While in the rest of the EU, workers and employers on average contribute 35.8 per cent of all their income to State coffers, in Malta, the implicit tax rate on labour – the ratio between taxes and social contributions paid on earned income and the cost of labour – stood at just 22.7 per cent, more than 13 per cent lower than the EU average.
Described as “the lowest in the EU by a wide margin”, Eurostat said the low labour taxes were mainly due “to the low employers’ social contributions”.
On the other hand, Maltese consumption taxes are more in line with EU trends, even though with a VAT rate of 18 per cent, Malta has one of the lowest in the EU. While the EU’s average implicit tax rate on consumption in 2011 stood at 20.1 per cent, Malta’s was just a little lower at 19 per cent.
Other types of tax, such as environment and property taxes, are also taken into account.
While Malta is described as having high environmental taxes, 3.2 per cent of GDP compared to 2.4 per cent in the EU, property taxes are much lower than the EU average despite the impact of the industry on the economy and the island’s environment.
“The reason is that there are no wealth or real estate property taxes in Malta and revenue is generated only by transfer taxes. Therefore, revenue from recurrent taxes on immovable property is zero.”
In general, the EU study shows that in 2011 the tax burden varied significantly between member states, ranging from less than 30 per cent in Lithuania (26 per cent), Bulgaria (27.2 per cent) and Latvia (27.6 per cent) to more than 40 per cent in Denmark (47.7 per cent), Sweden (44.3 per cent), Belgium (44.1 per cent), France (43.9 per cent) and Finland (43.4 per cent).