Download CONSOLIDATED FUND 2010/2011 The measures announced tonight by

Malta
The measures announced tonight by
the Minister of Finance, the Economy
and Investment in the budget speech
for 2011 include:

25 October 2010
CONSOLIDATED FUND 2010/2011
2011
€
(millions)
A cost of living increase of €1.16
per week

Introduction of measures aimed
at incentivising industry

No changes to income tax bands

Increase in VAT rate on
accommodation to 7%

Extension of VAT return filing
and payment deadline when
submitted electronically

Continued focus on the
introduction of anti-abuse tax
measures
Recurrent Revenue
Tax revenue
Non tax revenue
Total
2,393
398
2,791
2,264
346
2,610
Recurrent Expenditure
Personal emoluments
Programmes & initiatives
Contributions to public entities
Operational and maintenance expenses
Interest on public debt
Total
582
1,444
205
108
208
2,547
574
1,437
200
115
198
2,524
Recurrent Surplus
244
86
Capital expenditure
(440)
(383)
STRUCTURAL DEFICIT
(196)
(297)
Consolidated Fund Balance – 1 January
(181)
(377)
(196)
(493)
(182)
(4)
(6)
(24)
570
360
(192)
(16)
(30)
550
312
(23)
(181)
Financing
Direct loan repayments
Net contributions to sinking funds - local/foreign
Investment (Equity Acquisition)
Loan facility to Greece
Local loans
This newsletter sets out a
summary of these and of the other
main budget measures. More
details on the changes to tax
legislation will be given as soon
as the relative laws are published.
2010
(revised)
€
(millions)
Consolidated Fund Balance – 31 December
DOMESTIC ECONOMIC PERFORMANCE
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reserved. "PricewaterhouseCoopers" refers to
the Maltese firm of PricewaterhouseCoopers
or, as the context requires, other member
firms of PricewaterhouseCoopers International
Limited, each of which is a separate and
independent legal entity.
Government deficit

The deficit for 2010 is expected to reach €237.7 million (including €59m of
general government adjustments not included in the above table) or 3.87% of
GDP. This compares to an original estimate of €233.8 million. It is anticipated
that the deficit will decrease to €181.6 million (including €13.9m of general
government adjustments not included in the above table) in 2011 or 2.8% of
GDP.
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Overview Budget 2011

Inflation

The inflation rate for the year to September 2010
stood at 0.8%.
Gross Domestic Product (GDP)

COST OF LIVING ALLOWANCE
The GDP for 2010 is expected to be €6,135 million
representing an increase of 6.7% (in monetary
terms) over 2009.

Revision of tax bands
During the first eight months of 2010, imports
increased by 8.3% to €2,276 million. During the
same period, exports also increased by 33% to
€1,419 million.

At 30 June 2010, the number of people registering
for work amounted to 6,775 or 4.4% of the labour
force (the 30 June 2009 figure was 7,273 or 4.8%
of the labour force).

The number of gainfully occupied in June 2010
reached 145,690, of which 72% were employed by
the private sector.

Quality improvement incentives: As part of a Quality
Improvement Program, a tax deduction of a 150%
capped at €10,000, will be granted to persons who
invest in improving the quality of their product or
service offering.

Incentive for electric vehicles: A tax deduction
equivalent to 125% of the amount spent by companies
on electrical vehicles.

Deduction for school fees: The allowable tax
deductions for private school fees will be increased to
€1,200 (from €1,000) in respect of each child attending
primary school or kindergarten and €1,600 (from
€1,400) in respect of each child attending secondary
school.
Tourism

Tourist departures for the period January to
August 2010 increased by 12.1% over the same
period last year, to 903,314 visitors.

Cruise liner passenger arrivals increased from
294,795 passengers during the period January to
September 2009 to 344,817 passengers during
the corresponding period in 2010.

Earnings from tourism registered an increase of
15.6% during the first half of 2010, to €286.3
million.

On a per capita basis, expenditure by tourists
increased by 4.4% to €519.8 during the first half of
2010, while earnings per night spent increased
from €65.5 to €69.6.
New anti-abuse measures


VAT related measures
During the first six months of 2010, the total
industry turnover index increased by 21.7% when
compared to the same period of last year.
This was driven mainly by an increase of 27% in
total exports of the industry coupled with a rise of
16.4% in domestic sales.

As from 1 January 2011 the rate of VAT on
accommodation will increase from 5% to 7%.

Deadline for VAT returns and VAT payment will be
extended by 7 days in case of electronic filing and
electronic payment thereof.

With effect from 1 January 2011, businesses which
generate a turnover not exceeding €7,000 per annum
will be exempt from VAT registration.
Other incentives related to environmentally
friendly vehicles
Foreign Direct Investment

Introduction of additional measures to combat fraud
and tax evasion including the limitation of the use of
past losses of inactive entities against the profits of
group companies.
OTHER FISCAL MEASURES
Manufacturing

No revision of income tax bands was announced.
Deductions
The Labour Market

The weekly cost of living increase for 2011 is €1.16.
This increase shall be granted in full to pensioners.
INCOME TAX
Foreign Trade and Balance of Payments

This increase occurred as funds invested in the local
economy increased by €281.8 million while funds
invested abroad increased by €7.6 million.

Net Foreign Direct Investment inflows increased
from 7.6% of GDP during the first half of 2009 to
16.4% of GDP during the corresponding period of
2010, i.e. an increase of €274.1 million.
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A new scheme is being introduced as from 15
November 2010 providing for a benefit of a maximum
of €2,000 on the scrapping of an old car being
replaced by a new car with low emissions.
Overview Budget 2011



For the purposes of calculating the registration tax
in respect of hybrid vehicles, the CO2 value will be
reduced by 30% instead of 20%.
Measure for students

New incentive up to a maximum of €5,000 in
respect of installation of grid-connected renewable
energy sources for newly acquired electric
vehicles.
Creativity trust for cultural and creative activities

A reduction in the annual licence fee of electric
vehicles from €75 to €10.
Vehicle taxes

Removal of registration tax of 6.5% on sports cars
used in racing tracks and other authorised sites.

Introduction of unique registration plates for
classic car collectors with a consequent reduction
in the licence fee.

Introduction of a system whereby the registration
tax on commercial vehicles may also be computed
on the basis of the depreciated value or mileage of
the vehicle.

Students in their first 3 years of secondary school will
be given a credit of €15 to be used on cultural and
artistic activities.
A new creativity trust will be set up so that
contributions from the public and private sector may be
pooled together to sustain existing and new
investments related to cultural / creative matters.
Enterprises funding such a creativity trust will benefit
from fiscal incentives.
Agricultural measures

Social security contributions for self-occupied farmers
will be reduced to 12%.
OTHER MEASURES
Licence for wheelchair accessible vehicles will be
abolished.

Assistance to private independent schools: Refund of
15.2% of eligible expenses on new constructions
undertaken by private independent schools.

Increase in supplementary assistance: Assistance to
be increased to a maximum of €4.57 per week for
single persons and a maximum of €8.13 per week in
respect of married couples.

Service pensions: A further €200 (in addition to the
current €666) will be ignored from the service pension
when calculating the amount of social security
pension.
Disabled persons: An extension to the current
exemptions applicable to wheelchair use.
Excise duty

The excise tax on fuel will increase by €0.03 per
litre with immediate effect.

Excise duty on cigarettes and tobacco is being
increased by 3% and 4% respectively.

An increase of less than €0.01 in excise tax on
beer bottles of 25cl.


An increase of 13% in excise tax on spirits.
Clean energy and water conservation

Introduction of an excise duty of €9 on every tonne
of cement.

Re-introduction of assistance relating to solar water
heaters, with a subsidy of up to €400 of amount paid
for the equipment.

Further research to be carried out in respect of the
feasibility of wind-farms, clean energy from waste, the
sewage plant project in Ta’ Barkat and the National
flood relief project.
Working women

As from January 2011, the income earned by a
married woman entitled to social benefits will not
be included in the means test for the purposes of
the calculation of social benefits.

Self-occupied women may opt to pay a weekly
social security contribution of 15% of their income
instead of the applicable minimum rate of
contribution. However, this contribution will entitle
the payers for a pro-rata entitlement to social
benefits.
Sport

Financial assistance aimed at professional athletes
employed within the private sector who opt for reduced
working hours in favour of sport activities.

Sport organisations recognised by the Malta Sports
Council may benefit from grants amounting to 15.25%
of the price of sports equipment purchased for the
development of their athletes.

Re-introduction of 15.25% refund of the purchase price
of bicycles up to a maximum of €150.
Protection of benefits which are means tested

With effect from 1 January 2011, the cost of living
adjustment will not be taken into consideration
when calculating benefits which are means tested.
This should ensure that the increase in the cost of
living would not result in a decrease in benefits.
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Overview Budget 2011
Investment in local enterprise




Commitment by the Maltese Government to
contribute to the Eurostarts Fund - local SMEs
may qualify to benefit from carrying on research
and development projects.
Various investments in industrial sectors in the
aviation industry and in incentive schemes to be
provided by Malta Enterprise.
Assistance to industry in respect of training and
consultancy in connection to the franchising of
local products in foreign markets
Allowance of €25 per week for minimum wage earners
on training programmes.

€10 million fund assisting businesses in the tourism
sector to develop their product.

Contributions to Training Aid Programs assisting
employers in the training of their workforce.

Further allocation to the Employment Training
Programmes to assist disabled persons in improving
their employability.
MEPA Reforms
A public consultation process initiated in respect of
a proposed Act in order to facilitate the business
environment of SMEs, including an SME Test, and
the introduction of other measures.
Training


Various investments in the tourism sector
including the continuation of a €3 million
programme to improve the skills of persons
working in the tourism industry at a managerial
level.

A new Act will be implemented by MEPA which shall
establish two full time Environment and Planning
Commissions and a full time Environment and
Planning Review Tribunal to deal with appeals from
decisions by MEPA.

The Act will introduce a screening process of not
more than four weeks and time limits within which
development applications must be decided.
The notes are designed to keep readers abreast with financial and tax developments. They are not intended to be a
definitive or comprehensive analysis of the subject and should not be acted upon without prior consultation with the Partners
or Senior Consultants of the firm. For further details please do not hesitate to contact:
PricewaterhouseCoopers
167, Merchants Street, Valletta VLT 1174, Malta
Tel: +356 21 247 000
Fax: +356 21 244 768
www.pwc.com/mt
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