OVERVIEW BUDGET 2012 � FISCAL HIGHLIGHTS

Source: Elli Touray & Janine Bernsdorf¸ PKF Malta 

November 2011

IN SHORT: 

The 2012 Budget announced in Parliament on the 14 November includes measures with the aim of creating new jobs and consolidating economic growth.

Furthermore the Parliament shall be collecting €2.5 billion in tax revenue and announced additional tax measures to enhance foreign direct investments in target sectors¸ the introduction of new tax benefits and new tax band applications to parents.

INTERNATIONAL TAX MEASURES

  • new tax exemption on royalties from copyrights and IP
  • extension of 15% tax rate to certain non-resident professionals working in Malta
  • new tax credits for digital game development
LOCAL TAX MEASURES

  • tax and financial incentives for property renovation¸ rental and sale
  • income tax reductions for parents
  • additional personal tax deductions

 

 

Expectations: In 2012¸ the Minister of Finance expects the Maltese economy to grow by 2.3%. The inflation rate was not steady throughout the year and registered an increase from 0.96% in October 2010 to 2.73% in September 2011. The Maltese economy is expected to hit the 2.1% growth rate the end of this year.

The government’s deficit for 2011 is expected to reach €181.7 million or 2.8% of GDP and therefore the expectations given in the last year’s budget can be seen as confirmed. The Parliament anticipated that the Government’s deficit will decrease to €153.9 million or 2.3% of GDP. The government debt is expected to be 70.14% of GDP.

?ECONOMIC INDICATORS

GROSS DOMESTIC PRODUCT (GDP): The GDP for 2011 is expected to be €6.465 million. This corresponds to an increase of 4.9 %. The 2012 GDP is expected to reach €6.78b.

LABOUR MARKET | UNEMPLOYMENT: In the first quarter of 2011 the unemployment rate decreased by more than 2.5% (the average growth in the Euro Zone was 1%). The number of people registering for work recorded 6.212 or 6.6 % of the labour force.

FOREIGN TRADE AND BALANCE OF PAYMENTS: By September 2011¸ imports increased by 13.3% to €3¸526 million and exports also increased by 10.8% to €2¸245 million.

MANUFACTURING: In comparison to 2010¸ the total industry turnover during the period from January to July 2011 decreased by 5.7%

COST OF LIVING (COLA): The cost if living adjustment for 2012 will be €4.66 per week. The COLA shall als