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The International Context

Explore the impact of the global economic crisis on EU states, highlighting recovery measures and strategies in Malta. Learn about budget priorities, tax reforms, and economic forecasts shaping the road to recovery.

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The International Context

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  1. The worst global crisis since the 1930’s, has led to drastic increases in deficits and in the levels of unemployment In September 2009, there were 22 million unemployed European citizens There are signs that the economic recession might be on the decline, however, the acceptable levels of employment may still be distant from being reached The majority of the EU member states experienced negative economic growth in 2009 and the Commission is predicting that this trend is set to continue during 2010 Globally, there have been considerable decreases in terms of investment and consumption The International Context

  2. Malta has not been hit by the collapse of the financial markets, but the Maltese economy has felt the implications of the international economic crisis The correct timing of decisions taken by the Government (diversification, investment in education and training) and the abrupt interventions during the financial crisis have helped to soften the impact and keep the increase in unemployment at a lower rate than the EU The EU Commission and the IMF have positively commented on the government’s actions to save jobs The Local Scenario

  3. Reductions in the government’s revenue have been mainly influenced by decreases in the levels of income tax collected and led to Excessive Deficit Procedures Need for continuity in the road leading to sustainability The Local Scenario

  4. The World’s EconomyReal GDP Source: European Commission

  5. The World’s EconomyUnemployment Rate Source: Europen Commission

  6. The World’s EconomyGovernment Balances - Ratio to GDP Source: European Commission

  7. Public Debtas a % to GDP Source: Europen Commission

  8. International Trade Source: National Statistics Office

  9. EmploymentGainfully Occupied Source: National Statistics Office

  10. EmploymentGainfully Occupied Source: National Statistics Office

  11. Employment GenerationPublic & Private Sectors Source: National Statistics Office

  12. Cash in Hand & Deposits Net Issuance of Government Bonds € 116.0m € 194.2m € 248.8mPrivate Equities & Bonds€ 97.0m € 119.0m € 264.0m Source: Central Bank of Malta

  13. Cash in Hand & Deposits Source: Central Bank of Malta

  14. Stock Exchange Indices Source: Central Bank of Malta

  15. InflationRetail Price Index Source: National Statistics Office Set2009

  16. Malta’s Tax BurdenCompared to other EU Member States Source: European Commission

  17. Malta’s Tax BurdenCompared to other EU Member States Member States 8 18 Source: European Commission

  18. Malta’s Employment Tax BurdenCompared to other EU Member States Source: European Commission

  19. Other EU Members States 2010 BudgetFrance • Retirement bonuses will become taxable • Several household tax credits were reduced • Tax credits for home buyers significantly decreased • From 2010, households and businesses will pay an additional tax on their consumption of oil, fuel oil, gas and coal • Removal of local business tax • Deficit: -8.2% • Economic Growth: 1.2% • Unemployment: 10.2% Source: European Commission

  20. Other EU Members States 2010 BudgetThe Netherlands • Students grants for 2010 and 2011 have been frozen • Government cutting more than €140m in Education spend • No more travel allowance for 16 and 17 year-olds in secondary schools • Plans for social benefits reduction of social benefits • Spending on family doctors, hospitals and nursing homes will be reduced by almost €11 billion through plans to cut spending by every department by 20%, according to a letter from the Government to parliament • Deficit: -6.1% • Economic Growth: -0.8% • Unemployment: 5.4% Source: European Commission

  21. Other EU Members States 2010 BudgetSpain • VAT increase from 16% to 18% • €400 annual rebate for all taxpayers will be scrapped. • An increase of 3%, up to 21% in capital gains tax • Increase on the levy in income from savings to 19% on the first €6,000 and 21% for the rest • Deficit: -10.1% • Economic Growth: 0.3% • Unemployment: 20% Source: European Commission

  22. Deficit 4.5% 4.4%EU Forecast

  23. Deficit

  24. Incentivise economic, fiscal and price stability and a greater competition in our markets Incentivise productive investment to generate wealth and jobs More investment in the Health Sector, while continuing in our significant assistance to those in need To continue in our policy of upgrading the training and education levels as to achieve a society with a stronghold of knowledge Priorities for the 2010 Budget

  25. Investment in the country’s infrastructure in order to continue achieving economic growth and building the foundations for a better future within the environment, roads, national heritage and in the economic sectors Implement our vision for Gozo as an ecological island Priorities for the 2010 Budget

  26. The Economy in MaltaIn Real terms of GDP Source: European Commission

  27. Financial Estimates

  28. Financial Estimates

  29. Financial Estimates

  30. Financial Estimates

  31. Financial Estimates

  32. Financial Estimates

  33. Government’s Expenditure for 2010

  34. Removal of the €16.31 levy on credit cards Reduction in boat registration and licensing Increase of €0.15 in Excise Duty on cigarettes Government’s Fiscal Policy

  35. Where possible, the financial estimates for 2010 have been either maintained in the same level or even decreased Less employees within the public sector Decrease in the Government Entities’ dependency on subsidies Enhance the fight against fraud and abuse of social benefits Enhance the tax collection system in order to reduce tax evasion Measures in Favour of Fiscal Consolidation

  36. Increase the Malta Enterprise budget vote to €5.6m Increase the Incentives budget vote to €9m Foreign investors and those who are already established in our country will be encouraged to start operating in areas of shared services like those of software developing, call centres, digital gaming, accounts, etc €16m in upgrade works within Industrial Zones –Kordin, Ħal Far, Bulebel, Mosta and Xewkija Creation of a Reserve Fund of €2.5m as assistance to Industry Measures to enhance economic activityAssistance to the Industry in order to create more jobs

  37. Increase in the allocaion of the 20millionforindustry by €7m International Competitiveness€2m Innovation€3m Research & Innovation€1m e-Business€1m Re-issue of the Environment Scheme – €1.5m still not allocated Extension of the 12% Final Witholding Tax on property by two years to 7 years Renewal and increase in organistions eligible for the fiscal incentives given under the Reinvestment Tax Credit (Income Tax) Rules of 2005 Measures to enhance economic activityAssistance to the Industry in order to create more jobs

  38. Research & Innovation Fund doubled to €700k Allocation of €250k for a National Strategy for the development of Digital Gaming Allocation of €250k for the setting up of a Human Genome Databank in conjunction with the MCST, ME and UOM The formation of the Malta University Research, Innovation and Development Trust Fund with an initial capital of €500k, in order to encourage research and its employment for commercial and industrial capacities. Donations of more than €150 will be deducted from taxable income (up to €50k) Measures to enhance economic activityResearch and Innovation

  39. Tax exemptions or tax benefits for income from royalties on patents in order to encourage research and development activities Investment of €20m for the continued development of the Biotechnology Park in San Gwann 15.2% refund on expenses on which tax has been paid on reserach projects approved by the Ministry of finance and MCST Measures to enhance economic activityResearch and Innovation

  40. A €10m fund for micro-credits up to €25k which will make it possible to nearly 1,500 SMEs obtain the necessary liquidity for investment In 2010 and 2011, small enterprises and self employed that employ no more than 10 employees, will be able to benefit from 40% tax credit if they improve their facility or premises, invest in new technology and machinery, improve their level of operation or create new jobs This tax credit is increased to 60% for those operating in Gozo Draft legislation on SMEs Measures to enhance economic activityAssistance to Small Enterprises and Self-Employed

  41. Allocation of €200k for Skills and Crafts Consultative Council for the Enterprise to serve as a forum between the Government and its Authorities Setting up of a one-stop-shop within Malta Enterprise by June 2010 to provide assistance on European Programmes Revisit the trade licensing system Formulate a regulatory framework to improve the SME access to assistance provided by the ETC, the Malta Standards Authority and the Health and Safety Authority on issues of safety standards on the places of work Measures to enhance economic activityAssistance to Small Enterprises and Self-Employed

  42. Initiate a formal consultation process to identify those public entities and departments that need to adjust their working hours to better service the needs of SMEs Mandatory independent and periodical research by Government Departments and Entities on the their level of service so as to highlight critical areas Measures to enhance economic activityAssistance to Small Enterprises and Self-Employed

  43. An allocation of €31m to the MTA, including a special package of €5m to address the international crisis Increase in accessibility and investment in support to airlines Introduction of new routes as from next year Improved marketing packages on already established routes as well as new markets such as the Middle East Revamp visitmalta.com An allocation of €500k to extend schemes targeted at sports organizations and the public sector to attract international conferences Measures to enhance economic activityIncentives for the Tourism Industry

  44. The technical report on VAT shows that a decrease in VAT would result in: a 0.2% growth in 2010 public finances will decrease by €29m in 2010 and €23m in 2011 in Portugal the consumer benefitted 20% (partial) in France the consumer benefitted 40% (partial) Negligible impact on tourism does not justify the loss in Government Revenue Measures to enhance economic activityIncentives for the Tourism Industry

  45. ETC budget to increase from €2 to €3.3m A 12-week work trial scheme aimed at integrating unemployed people (500 persons targeted in 2010) Financial assistance for childcare facilities for mothers who want to participate in training programmes and other schemes A €6m investment, financed by the EU, for the implementation the Employment Programme Assisting more people in returning to workSupport Schemes and Training

  46. New programme targeting youths aged between 16 and 20, who are registering for work in order to obtain a qualification that is recognised by the Maltese Council for Qualifications and in the EU A new employment centre in Birkirkara A trial scheme intended to give necessary work experience to those seeking job opportunities Provision of advise to those seeking work The extension of the working scheme in the community for those registering for work Assisting more people in returning to workSupport Schemes and Training

  47. The launching of an educational campaign in order to explain the benefits of declared employment Invest in a mobile computer laboratory to be used outside the class Provision of help to persons with moderate and severe disability on the place of work Assistance to those that improve the work environment so as to be able to employ persons with severe disability A revision in the policies and register of persons suffering from disability Assisting more people in returning to workSupport Schemes and Training

  48. Doubling of the allocation to childcare services with setting up of centres in Santa Venera, Floriana, Imsida and Zejtun Setting up of a National Unit for Child Care Extension of the project of schools functioning after hours, where two new schools will be offering these facilities as from 2010 Incentives to employers who offer childcare facilities to their employees Extension of the €1,000 Tax Reduction Scheme for children attending Child Care Centres in summer and children older than 3 years Assisting more people in returning to workChild Care Centres

  49. Initiate the process of amalgamating the VAT, IRD and Customs No refunds on VAT and Income Tax unless all returns have been filed Anti-abuse provisions to avoid aggressive tax planning Taxpayer’s Charter Intensify the fight against the illegal importation of fuel and the evasion of excise through a system of DNA Marking and better equipment at Customs Harsher penalties for those negotiating in illegally imported fuel Measures in Favour of Fiscal Morality

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