Malta’s financial and economic situation
During 2011, the Maltese Government has been implementing a number of revenue-increasing measures and engaging in growth-enhancing initiatives to strengthen Malta’s international competitiveness within the context of an international economic crisis. As statistics submitted to the European Commission show, Malta’s deficit and public debt is low in comparison to other members of the European Union. As international credit rating agencies have commented this is viewed as a strong signal of good governance. Notwithstanding, the Maltese Government has expressed its commitment to reduce the deficit to 2.8% of the gross domestic product (GDP). It is estimated that Malta will reach the 2.3% deficit target by 2012.
Inflation has risen to 2.7% during the last 12 months but is expected to fall to 2.1% by the end of this year.
In line with its short- and medium-term fiscal framework within the European Union (EU) Stability Programme, the Government has announced that its objective for 2012 is to implement an appropriate fiscal consolidation strategy and to strike the right balance between expenditure-reducing and revenue-increasing measures.
Cost of living adjustment
The cost of living adjustment, calculated on inflation showing in the Retail Price Index and according to the methodology agreed upon by the social partners, will be €4.66 a week. In 2011 this stood at €1.15.
Personal Income Tax
In light of the current international climate, the Government announced that an earlier electoral pledge to reduce overall income tax levels cannot be granted. In its stead, the 2012 Budget introduces a new tax computation as an incentive to parents. Presently, the Income Tax Act contemplates 3 computational mechanisms and three tax brackets. Whilst unmarried individuals must use a specific tax bracket, married couples living together may opt for joint or separate computation of earned income.
