The main event of this year's budget was without doubt the raising of the income tax thresholds for low and middle-income earners. The lowest threshold has been raised to Lm4,300 to Lm4,500 for joint computations, while the 25 per cent band has been extended to Lm10,000. This means savings of Lm30 for those earning up to Lm6,000 and of over Lm243 for those earning over Lm10,000. The 20 per cent and 30 per cent bands have been consolidated into the 25 per cent and 35 per cent bands.
Mr Fenech said that the government would consider increasing the 35 per cent threshold of Lm10,000 in the future.
Malta's taxation on labour is among the lowest in the EU at 12.2 per cent of GDP, compared to the EU average of 18.5 per cent. Under the previous tax bands, 37 per cent of taxpayers in Malta were below the minimum taxpaying threshhold.
A husband and/or wife working in a family enterprise can now be considered as employees for tax purposes. Part-timers working more than eight hours will be able to opt for a 10 per cent social security contribution rate - although this will mean that they would receive a proportionate reduction in their pension. The government had originally envisaged changes to the minimum contribution but at the request of the unions, this is to be discussed further.
The number of people who work part-time increased by 7.4 per cent between June last year and June this year. Of the total 43,177 part-timers, 19,692 are women.
As already announced, the departure tax will be halved to Lm10 - but not until June 1, 2007. The tax had been raised to Lm20 in August 2005 and is expected to bring in Lm4 million for the government this year.
Energy
Although the surcharge is not dealt with in the budget, as a separate mechanism exists for its calculation, the government has announced that 17,000 families will receive vouchers to be used to offset their water and electricity bills. The amount will depend on factors such as the size of the household.
There are also incentives for people to switch to more energy-saving appliances, with up to Lm50 off the cost of new white goods including air conditioners. Last year, the increase in oil prices cost Malta an additional Lm48 million.
Economy
One-offs like the Maltacom sale and sale of property brought last year's deficit down to Lm75 million, but the government will this year bring it down again, to Lm57 million without any one-offs, bringing it comfortably within the euro accession criterion of 3 per cent of GDP.
The government cited a number of indicators to support its claim that the economy is improving, such as an increase in the number of gainfully employed and the increase in gross fixed capital formation. The GDP is expected to grow by 2.6 per cent in 2006, compared with 2.4 per cent last year.
However, it is the bottom line that counts and the parliamentary secretary Tonio Fenech pointed out that the amount of income tax collected had increased to Lm250 million, Lm28 million more than forecast. Although this includes a considerable chunk from the increased profits from banks, Mr Fenech said the increase was spread across other companies and also individuals. It was also due to the increased number of people that are employed.
Tourism
This year, Lm15 million will be spent on the sector. The Malta Tourism Authority's budget will remain unchanged at Lm8 million, while Lm7.3 million will be spent on upgrading the prehistoric sites and creating and improving the bays, as well as to incentivise low cost routes. Heritage sites will get Lm3.6 million, for projects that include: the National Library, Mdina's entrance, the old church in Siggiewi, the Sta Venera aquaduct, the Floriana Mall and the Ta' Xbiex promenade.
Tourism has decreased in actual numbers of visitors, with January to August this year showing a decline of 3,7 per cent, and a corresponding drop in employment of 0.6 per cent. However, per capita spending by tourists has increased by 2.8 per cent in the January to August period.
Social
There will be tax relief of up to Lm400 for children in licensed childcare. In addition, childcare services at the workplace will no longer be considered as a fringe benefit and will no longer be taxed.
This year's cost of living increase is Lm2.25, which includes the 50c already announced last year.
There have also been changes to inheritance of property.
The first Lm15,000 in value of a property will be exempt of tax if the person bequeathing it resided there. The threshhold was previously Lm10,000.
If the person inheriting the property also resides in it, then the second Lm15,000 in value will be subject to a duty of 3.5 per cent.
In an effort to boost the number of properties available for rent to social cases, the government has offered a preferential tax rate of 5 per cent on the income from rental for a 10-year period.
Widows and widowers will be able to draw a fixed rate pension if they start to work, and also for five years if they re-marry.
Gozo
Gozo has been earmarked for considerable investment: Lm15 million on capital projects alone. These include Villa Rundle, a promenade at Mgarr and a visitors' centre at Ggantija, as well as cruise liner anchoring facilities and other infrastructural improvements.
Accommodation and catering establishments will only have to pay 75 per cent of the licence fees paid at present, as compensation for the seasonality of their sector.
Gozo has a GDP per capita that is 69 per cent of that for Malta. At 31,053, the population of Gozo accounts for 7.7 per cent of the total.
Enterprise
Malta Enterprise will get Lm2.3 million this year. It approved 71 projects in the first nine months of the year, which will create 3,600 new jobs over the next three years and generate Lm44 million in investment.
The government has also earmarked Lm1.5 million for research and innovation, Lm250,000 more than envisaged in the strategy document published earlier this year.
Ta' Qali and other industrial zones will get Lm1.4 million.
The government will also set up a Venture Capital Fund of Lm900,000.
Education
Parents of the 8,000 children in private schools will get double the tax relief, Lm400 for each child in primary school and Lm600 for each child in secondary school. There will also be tax relief of up to Lm400 for children in licensed childcare. Childcare services at the workplace will no longer be considered as a fringe benefits.
The government also announced that students following full-time courses in private institutions will get the same stipends as students at university or MCAST.
A number of measures will be taken to improve educational institutions, ranging from Lm4.3 million being spent on the University of Malta and the Malta College of Arts, Science and Technology, to an increase in the university's budget of Lm700,000, bringing the total to Lm11.3 million.
The percentage of students that drop out of the education system after secondary school has been dropping steadily, from around 48 per cent to around 37 per cent.