KPMG - Malta
Mark Bamber
Advisory Services
Was this a good or a poor Budget – and why?
This Budget needs to be viewed in the context of the US economic recovery, low global oil prices, developments in the EU, Brexit uncertainty and sharp devaluation of sterling, and past trends in the Maltese economy. Malta’s economic policy in recent years has focused on growth, with this Budget emphasising themes of social justice and investment. In the context of European growth rates, Malta’s economic growth in the first six months of 2016 is a very welcome result. So too is the reduction in the public deficit and the strong net new job creation, largely in the private sector. We also welcome the package of measures aimed at raising the quality of product Malta. Perhaps one question is whether the Budget, in balancing an investment objective with a deficit reduction strategy, is going far enough to drive strong measures to address our immediate problems like infrastructure and connectivity?
Will it help Malta to retain its competitiveness?
The setting up of the Malta Development Bank is a welcome addition to the economic infrastructure of the country, as is the setting up of the Malta Export Credit Agency and of an international accelerator for start-ups, the commencement of activity by the National Economic and Social Development Fund, and measures to reduce the bureaucratic burden faced by entrepreneurs. When implemented, they will collectively support our competitiveness. Of concern, however, is the immediate aftermath of Brexit, and how the devaluation of sterling will affect our trade in goods and services with the UK. Equally important will be the short-term decisions and initiatives to be taken over the coming year with regard to the cost of energy and fuel. Thirdly, the thinness and saturation of our labour market are potentially points of tension in our international competitiveness, and resolving resourcing shortages through the attraction of talent and manpower, and their attendant infrastructure requirements.
Will it improve our ability to attract FDI?
The minister’s expression of support for the financial services sector and the integrity of Malta’s tax system, as well as government’s commitment to the dynamic, innovative development of the legislative framework to ensure Malta remains competitive, yet compliant within the rapidly evolving international landscape, are important signals to strengthen our defence of incoming FDI momentum. Strong economic dynamics, a multinational and multicultural talent pool, and an exciting vision of Malta on the fast lane to further development, with the implied opportunities that this entails, should be a key driver for additional FDI.
Good Earth Distributors
Matthew de Giorgio
Director
The government has put a tax on non-alcoholic soft drinks but insisted that it was not a sugar tax. Are you disappointed? Is the government doing enough to encourage a more healthy lifestyle?
Though we are still awaiting clarity from the government on what this tax consists of, I believe the government may not be seeing the bigger picture in its decision to tax non-alcoholic drinks. We at Good Earth are trying to encourage a healthier and more natural lifestyle and we do our best to ensure that our products help promote this. We offer an extensive range of high-quality bulk commodities, conventional, organic, fair trade and ethically-sourced goods. We believe that products should be taxed based on their nutritional value. Don’t wrap all drinks in the same blanket. We should be trying to encourage people to make healthier choices. Some drinks are ladled with unrefined sugar but other drinks contain more natural sweeteners like our birch water which contains naturally-occurring xylitol found naturally in the birch tree. The government needs to look at the whole picture. Healthier people have fewer health issues and are less of a drain on healthcare. Malta is known the world over for its high rates of obesity and its rising level of type 2 diabetes. Let’s nip the problem in the bud and help people make the right choice.
Engel & Völkers Sara Grech Malta
Benjamin Grech
Managing director
The government has reduced the stamp duty for Gozo. Why did it feel that it had to do so and will it distort the market?
Gozo is unique; it has retained an abundance of culture and a heritage which can still be felt in its quiet streets. I believe that the scheme of reduced stamp duty has been introduced with the intention to bring this beautiful historic island back to life. Many Maltese have invested in “holiday homes” all over Europe, in locations which do not even begin to compare to Gozo which is just a 20-minute ferry ride across the channel. I am sure that in the coming months we shall see a heavy increase in interest for investment in Gozo as a second home market. In turn, we cannot forget the importance of commercial property, cafés, shops, restaurants, etc. Their success depends on having more people frequent the island.
Baker Tilly Sant
Donald Sant
Managing partner
The government has given post-secondary graduates who start up a company with a turnover of less than €80,000 the option to do without an audit. The GRTU wanted many more SMEs to be exempted. What do you think of the measure?
Unfortunately, many people and businesses still do not fully understand the value of an audit and see it only as a “regulatory burden” and not as a measure for growing businesses to establish good management practices as they become economically significant.
International Standards on Auditing require close examination of an entity and its environment, including the entity’s control environment and internal controls. Auditors are required to assess how management identifies and mitigates risk as part of the audit risk assessment. The annual audit for a small- or medium- sized business provides opportunity for an owner-manager to receive an external “health check” on the reliability of the financial information they use for decision-making purposes, including the way transactions are captured, measured, recorded and evaluated, by comparison to recognised reporting frameworks. As smaller businesses rarely employ internal experts, the external audit is often a cost-effective trigger for identifying where expert advice might be needed. Consequently, the external audit has an important role as a business grows and responds to the increasing level of interest from external stakeholders in an entity’s financial position.
A regulatory approach which promotes external audit not only reduces the risk of business failure but also equips smaller businesses with an understanding of how to develop management practices that enable them to grasp opportunities while mitigating risk. These skills are essential for continued growth and prosperity in a vibrant SME market like Malta.
Focus Software Solutions Ltd
Anthony Lupi
Managing director
Has the government done enough to stimulate innovation and to encourage investment in IT?
In the Digital Malta/National Digital Strategy, the Prime Minister had described this as the commitment to actions to turn us into a digital society. But the focus is no longer on providing IT resources and skills at a cheaper cost, as was the case a decade or so ago. There are now other countries which can provide such skills at a cheaper cost. But, yes, the effort is there. The government does see that skills and expertise in IT will improve the country’s competitiveness.
In recent years, we have been hit by the increase in i-gaming companies which can offer higher salaries and attractive employment terms to our employees, luring them away or raising their salary expectancies to levels which few local companies can afford. There are now insufficient skills to address the demand and IT training is a must. Mcast has helped and is today producing recruits of a good quality, but the numbers do not add up. They are still not sufficient and this has resulted in the importation of employees from other countries, which is fine, except that this introduces new problems.
Arrow Express Ltd
Nikki Zammit
Managing director
The Privatisation Unit has already issued the RFP for the logistics hub. What are the implications for you?
This project is indeed a welcome step in the right direction, however, investment in the hub alone is not sufficient. All stakeholders such as ports, transportation companies etc, should start preparing for this in advance by making the necessary investment to be able to handle the increase in business that would be expected once the ILH is operational. Even though there is already a fair amount of trade being transshipped or hubbed through Malta, associated expenses for this type of trade are still too high locally, compared to other countries, possibly making Malta seem unattractive as a hub to international traders.
For such a project to be successful, it is important to look at countries like Singapore, the United Arab Emirates and the Netherlands, who, by the creation of these logistics hubs, have created value by reducing the costs associated with the transportation, storage and distribution of goods from producer to consumer, thereby improving competitiveness. These countries have shown how logistics hubs have provided the catalyst to economic growth, particularly the Netherlands, whose logistics sector alone accounts for eight per cent of total employment.
Creek Developments
Etienne Bonello DuPuis
Managing director
The government is finally going to go ahead with the Marsamxett breakwater. What impact is that going to have on the marinas in the creek?
Generally, any significant government investment in the Maltese yachting industry infrastructure should be viewed in a positive light.
At present, the only marina in Marsamxett harbour which is completely sheltered from the dangerous northeasterly swell is the Msida and Ta’ Xbiex Marina, operated by Creek Developments plc. The addition of a breakwater at the entrance to Marsamxett Harbour would be of benefit to all the marinas in Marsamxett, increasing the availability of safe all-weather berthing spaces and improving the overall quality of the Maltese yachting offering.
However, it should also be considered that a breakwater affects water movement and may therefore significantly impact the seawater quality in the enclosed body of water.
The Marsamxett area differs from the other Maltese ports sheltered by breakwaters due to the relatively narrow entry and the very high population density surrounding the port. Hence it is essential that proper studies are carried out prior to commencing construction, to ensure that other stakeholders in the area surrounding Marsamxett, such as residents, hoteliers and other water users are not negatively affected while marinas benefit. One assumes that such studies are planned and we look forward to the consultation process.