Encouraging young unemployed people to find work and targeting those on low incomes was the central thrust of the Budget presented by the Labour government last night.
“This is a Budget full of ideas on how to improve things,” Finance Minister Edward Scicluna said during a press briefing before he walked into Parliament.
“When you introduce innovative measures, you never know whether they will work or if they will work as planned. But we were very encouraged by the measures introduced in Budget 2014 and now want to shift the focus. This is why the theme this year is making work pay.”
The government will be giving a range of allowances and incentives which will cost it €22 to 25 million, more than the €19 million it will lose from the third and final reduction in the top income tax rate, which has gradually gone down from 35 per cent to 25 per cent.
Many of these measures are aimed at those who do not work, from mandatory three-year training for under 23s who register for work – refusal to take part will mean they cannot claim benefits – to cash payments for single mothers and the retention of their benefits should they go to work.
There are also several measures aimed at the disabled, including incentives for employers.
The government is giving a one-off bonus of €35 to workers who do not benefit from the income tax reduction as well as to pensioners and pro rate to part-time workers and students, which will cost it €8 million. This is meant to complement the annual cost of living allowance (COLA), which is based on a formula linked to inflation and will this year be 58c.
It is also introducing a number of indirect taxes. These include increases in excise tax on cigarettes and tobacco, fuel and wine, and mobile telephony as well as higher car licence fees for many vehicles and a daily levy on construction cranes located on roads.
On the other hand, the government will be phasing out by September 2015 the unpopular eco tax on white goods that already fall under another EU directive and is replacing 2006 capital gains on property with a final withholding tax that will range between 8-10 per cent.
This is a Budget full of ideas on how to improve things
It has also come up with a way to spread the burden of maternity leave for employers. Instead of the current system where employers pay directly for the first 14 week of maternity leave, this will now be paid through a fund that will receive a contribution of 0.3 per cent of workers’ yearly salary, paid for by all employers.
Some of the measures introduced in 2014 which were deemed to be successful will also be extended: the scheme exempting first-time property buyers from stamp duty on the first €150,000 will be extended to contracts signed by June 2015. The car scrappage scheme will also be extended.
Incentives are also being offered for parents of children attending Church and private schools who use school transport as well as a promise not to raise public transport fares.
The government is forecasting €200 million more in revenue, mainly as a result of economic growth.
After bringing the deficit down from 3.7 per cent in 2012 to 2.7 per cent of GDP in 2013, the government is aiming to reach a deficit target of 2.1 per cent of GDP for this year and to further reduce it to €149 million, or 1.6 per cent of GDP, in 2015, the lowest level in 34 years. The government is forecasting three per cent growth this year and 3.5 per cent in 2015.
Apart from measures which will have an immediate impact, the minister also announced a number of longer term projects that will be launched, many of them with the private sector.
The government is hoping to use public private partnerships to solve both the capital-hungry nature of projects as well as their ongoing efficiency. These vary in size and scope, with a special emphasis on Gozo and the south.
At a glance
• Full-time workers who will not benefit from the income tax drop from 29 per cent to 25 per cent will get a one-off €35 bonus. Pensioners, students and part-time workers will also get a bonus.
• 9,000 families on the poverty line will get a bonus of up to €400 per child tied to school attendance and other things.
• Excise duties have been increased on cigarettes (10c), petrol (2c) diesel (1c) and wine (20c per litre). Duty on cement and other tobacco products will also go up.
• Excise duty on mobile phone use will rise from 3 to 4 per cent.
• Capital gains tax is being overhauled. People will no longer have the option to choose between income tax and a final withholding tax and will instead only have a final withholding tax of 5-10 per cent depending on how long the property has been held.
• Eco tax will be phased out on electric and electronic goods.
• Public transport fees will not be going up when the new Spanish operator takes over and there will be more discounts on season tickets.
• 0.3 per cent will be paid by employers on all employees’ salaries. This will go into a fund to pay maternity leave.
• Youths under 23 who register for work and do not have tertiary education will have to follow mandatory training before claiming benefits.
• 10 community homes for the disabled will be built and there will be incentives for employers who take them on.
• Cruise liners will be able to open onboard casinos if they stay in Malta overnight and will pay tax. Those who stay in both Malta and Gozo will be tax exempt.
• The Cospicua health centre will be run as a public private partnership while a new one will be opened in Żurrieq.
• Tower cranes will pay up to €15 a day while on the roads.
Budget 2015 will be discussed and analysed on Times Talk today on TVM at 6.45pm.