Next year’s Budget is expected to feature a further shift from direct to indirect taxation while the International Investor Programme is expected to render 0.57 per cent of GDP.

In a draft of the Budget sent to the European Commission, the government said the shift in taxation would not involve raising VAT.

Further revenue in indirect taxation equivalent to 0.3 per cent of GDP will be levied on consumer goods and services while a revision in fees on market output will render 0.06 per cent of GDP, compensating for lost revenue due to lower income tax bands.

Meanwhile, the asset registration scheme launched this year is expected to increase the income tax base through the newly declared assets and is expected to contribute additional income tax revenue per annum.

The increase in pensionable age announced as part of the 2006 pension reform is expected to contribute an additional 0.14 per cent of GDP in national insurance contributions.

These measures total 1.11 per cent of GDP and will be partly offset by the further reduction of four percentage points in the middle income tax bracket, estimated at 0.24 per cent of GDP. The lost revenue will stem from the one-off investment registration scheme fee received in 2014, amounting to 0.13 per cent of GDP, and lower temporary revenue amounting to 0.02 per cent of GDP.

Among the measures that will weigh on the Budget is a higher equity injection to Air Malta next year, equivalent to 0.34 per cent of GDP.

There is also higher expenditure over 2014, equivalent to 0.08 per cent of GDP, towards the annual supplementary children’s allowance, which is conditional on school attendance, as well as health check-ups and psycho-social attention.

These upward pressures will be mainly offset through better control of the public sector wage bill, the government said.

This is expected to yield 0.12 percentage points of GDP in lower expenditure, by lowering the replacement rate in non-priority areas and “better control on the non-wage component of the personal emoluments”, the draft says.

Meanwhile, the government said in a statement that it was expecting debt to slip below 70 per cent of GDP for the first time in many years while the deficit was projected to narrow to 1.6 per cent.

The GDP growth rate is being raised to 3.5 per cent while jobs are expected to increase by 1.9 per cent and unemployment remains stable at 5.9 per cent.