Source: Kinga Warda¸ PKF Malta
On 28th November¸ 2012 finance Minister – Tonio Fenech announced government plans to gradually decrease the income tax rate of 35% to 25% by 2015. This announcement couldn’t have come at a better time. The Budget presentation for 2013 was the perfect opportunity to proclaim previously promised income tax rate cuts. It seems¸ the Prime Minister – Lawrence Gonzi who is facing re-election in 2013¸ kept his promise.
Due to the fact that Malta already offered a favorable income tax regime¸ few believed in further cuts. Mr. Fenech said income tax will be cut to 32 percent from 35 percent next year (2013)¸ followed by decreases to 29% in 2014 and to 25% in 2015. The reductions will benefit single persons earning between EUR19¸501 and EUR60¸000¸ married couples earning between EUR28¸701 and EUR60¸000¸ and parents of children (and of adults under 21 in tertiary education) earning between EUR21¸201 and EUR 60¸000.
In addition¸ excise duty on petrol and diesel will increase by EUR0.02 per liter¸ and on cement by EUR5 per tonne. There will also be excise increases of 6% on cigarettes and 8% on tobacco.
Malta’s government states that it expects the Maltese economy to grow by 1.2% by the end of 2012¸ while the EU economy is expected to shrink by 0.4%. Last Thursday Mr Fenech stated that “We expect the reduction to cost the Government €10 million in the first year and €40 million in total”. Excise duty on fuel and cigarettes is expected to compensate this revenue shortfall.