A cut in the top income tax rate was the headline move by Finance Minister Tonio Fenech last night, as he presented the last Budget of this legislature.
More will be spent on health, education and social benefits
The income tax rate of 35 per cent is to be reduced for annual incomes of less than €60,000 to 32 per cent in 2013 and further cut to 29 per cent and 25 per cent in 2014 and 2015 respectively.
Between 2013 and 2015 a person earning €45,000 will save €3,000 in tax cuts while a person earning €60,000 will save €7,200.
However, there are increases in excise duty of 2c per litre on petrol and diesel, €5 per ton on cement, six per cent on cigarettes and eight per cent on tobacco.
Mr Fenech said the tax cuts would cost €10 million in the first year and €40 million over three years. The increases from excise duty are expected to raise an annual €12 million in Government revenue.
Mr Fenech told a press conference before his Budget speech that despite the difficult economic climate in Europe, Malta had performed well, and its economic indicators were better than the EU average.
The minister announced that the GDP growth rate for 2012 was estimated at 1.2 per cent, while the rate for 2013 is forecast to be 1.6 per cent.
A number of reforms were announced in the property sector. The choice of paying capital gains tax or a 12 per cent final withholding tax on a sale of property is being extended from seven to 12 years.
Furthermore, stamp duty on the transfer of property from parents to children is to be abolished and the 3.5 per cent stamp duty ceiling for first-time buyers has increased to €150,000 from €116,468.
More will be spent on health, education and social benefits next year.
The education budget has been increased by €12 million to €390.7 million, health expenditure will increase by €38 million to €465 million, and the budget for social benefits is being increased by €37 million to €787 million.
The minimum children’s allowance benefit has been increased from €350 to €450, and to €527 for families dependent on a minimum wage. IVF services are to be offered free to all eligible couples.
Other measures announced include a cost-of-living increase of €4.08 per week, plus the extension of the €300 annual allowance for those aged 80 and over, to 78 and over. This will eventually be extended to the over-75s.
Enemalta is to be injected with €25 million to prevent an increase in utility rates, the Malta Tourism Authority’s budget has been increased to €37 million, while Air Malta will receive €40 million for its restructuring programme.
In the tourism sector licensed hotels will benefit from a 15 per cent tax credit on capital expenditure and incentive schemes will be announced to increase the number of boutique hotels on Valletta, Mdina and Cottonera.
The Euro 5 registration tax on vehicles has been reduced by a maximum of 30 per cent while the Euro 4 registration tax has increased by an average of 10 per cent.
A number of employment and business projects as well as new health and educational services were announced for Gozo.
Stipends are being granted to young people aged up to 25, or to those who up to three years after graduating from University spend a year performing voluntary work.
Incentives for businesses were also announced. The maximum rebate given for international films being produced in Malta has been increased from 20 per cent to 23 per cent – or 25 per cent if Malta is featured as Malta.
The Micro Invest Scheme has been extended for a further two years and is now available for companies that employ up to 30 personnel, up from the previous threshold of 10. The former shipbuilding site in Marsa is to be transformed into a maritime park.
The fiscal deficit for 2012 has been revised to 2.34 per cent of GDP while the target for 2013 has been set at 1.74 per cent.
At a glance
• Income tax rate cut
The income tax rate of 35% is to be reduced to 32% in 2013, 29% in 2014 and 25% in 2015. Those earning more than €60,000 will continue to be taxed at 35%.
• No stamp duty on inherited property
Stamp duty on property transferred from parents to children abolished; 3.5% stamp duty ceiling for first-time buyers increased to €150,000. Choice of paying capital gains tax or 12% final withholding tax on property sale extended to 12 years.
• Children’s allowance increased
Minimum children’s allowance increased to €450 and to €527 for families dependent on a minimum wage.
• Cost-of-living allowance
As expected the Government gave a weekly cost-of-living increase of €4.08.
• Allowance for elderly
€300 annual allowance for the over-80s to be extended to those aged 78 and over. This will eventually be extended to over-75s.
• Higher excise tax
Increases announced in excise duty of 2c per litre on petrol and diesel, €5 per ton on cement, 6% on cigarettes and 8% on tobacco.
• Vehicle registration tax
The Euro V registration tax on vehicles reduced by a maximum of 30%, while the Euro IV registration tax increased by an average of 10%.