An income tax cut for parents, aimed at encouraging more people to go out to work, was announced this evening during the Budget speech.

Finance Minister Tonio Fenech said that in order to make the jobs market more attractive to parents, besides the single or married computation made for tax purposes, a new category is being introduced – the parents' computation.

This category will include parents supporting children up to 18 years old who are not gainfully employed. If the children are in tertiary education, the age will be extended to 21.  

Mr Fenech said parents will be able to save between €150 and €840 per year, depending on their income (See table). More than 55,000 families are expected to benefit from this measure, which will cost the government some €10 million.

Furthermore, the tax credit for women returning to work after the birth of their children is being extended, enabling such women to be exempt from income tax for a year. More than 8,600 women have benefited so far through this incentive, saving more than €10 million in tax.

The government hoped, Mr Fenech said, that it would eventually be able to implement the last part of its electoral promise to cut income tax, but this was not possible in the current economic climate.

This measure would cost the government €40m in its first year, although he was sure it would be recovered through economic growth. For the coming year, however, the governemnt wanted to have the elbow room necessary to enable it to intervene financially to safeguard jobs, as it did in 2009.

LONGER MATERNITY LEAVE

Mr Fenech said the government also plans to hold talks with the MCESD for an extension of maternity leave by two weeks next year and a further two weeks in 2013, with the cost being borne by the government for up to €160 per week.