The tax take as a percentage of Malta’s GDP grew by 3.8 per cent between 2004 and 2014, according to the latest data published by the EU.
The increase, which meant a total tax revenue of €2.7 billion in 2014, is three times the EU average, which stood at 1.3 per cent of GDP.
Also, according to a new European Commission publication, ‘Taxation Trends in the EU’, while the amount of indirect taxes dropped over the last decade, direct levies in Malta shot up by 7.4 per cent, one of the highest increases among the 28 EU member states.
On a positive note, those receiving a salary in Malta are among the least taxed in the EU. In fact, the island’s tax burden on labour amounted to 23.2 per cent in 2014, well below the EU average.
Direct levies in Malta shot up by 7.4 per cent, one of the highest increases among EU states
The Europeans contributing the largest cut from their salary to the exchequer are Italian workers who, in 2014, handed over almost €44 of every €100 they earned to the government. They were followed by Belgian workers, who face a labour tax burden of 43.5 per cent.
The study shows that, in 2014, direct taxation in Malta amounted to 67.4 per cent compared to all the taxes paid to the government.
The highest proportion of revenue under direct taxes came from personal income taxes, reaching 20.4 per cent. However, since various administrations cut the ceiling of the statutory income tax and adjusted tax brackets, the share of personal income tax as a percentage of the total tax revenues decreased slightly by 0.5 per cent over a decade. On the other hand, income from corporate taxation shot up significantly since 2004, most probably due to the financial services industry.
In 2014, 18.7 per cent of all direct taxes came from taxes on companies, up 7.2 per cent since 2004.
Other forms of direct taxes also went up by almost one per cent since 2004.
Amounting to 17 per cent of total tax revenues, social security contributions decreased by 3.1 per cent in the last decade.
Reaching 13.7 per cent of GDP, income from indirect taxation reached €1.1 billion in 2014.
VAT contributed to more than half the intake of indirect taxes, reaching €600 million in revenue this year.
The Commission’s report noted that Malta had a significantly low rate of VAT when compared to the 23 per cent average in the EU.
At 18 per cent, Malta’s standard VAT rate is the second lowest among the 28 member states, with Luxembourg’s 17 per cent being the lowest.
Hungary has the highest VAT rate at 27 per cent.
ivan.camilleri@timesofmalta.com