Maltas Budget 2025: Tax Reliefs, Social Support, and Infrastructure Plans Amid Rising Cost of Living

October 29 2024 14:13:17 by PCLMedia

In 2025, the government plans to expand income tax bands, allowing workers to save between €345 and €675. By adjusting tax brackets across three categories—single, married, and parent—the government aims to increase disposable income, effectively reducing income tax. Under the new rates, single-rate taxpayers won’t pay any tax on their first €12,000 of income, while married-rate and parent-rate taxpayers will have their first €15,000 and €13,000 respectively exempt from tax.

The 15% tax band will be broadened to cover income from €12,001 to €16,000 for single filers, €15,001 to €23,000 for married filers, and €13,001 to €17,500 for parent filers. Income up to €60,000 will fall under the 25% tax rate, after which the rate increases to 35%.

These cuts exceed the €60 million reduction promised in the Labour Party’s 2022 manifesto, with the 2025 budget cuts expected to cost the government €140 million.

A €40 million reduction occurred previously, from 2013 to 2015, when the top tax rate for incomes under €60,000 was reduced from 35% to 25% over three years. Although planned by the outgoing Nationalist administration, the measure was enacted by the incoming Labour government, which honored the pledge despite it not being in their manifesto.

Prime Minister Robert Abela described Budget 2025 as the starting point for advancing the country, themed “A Country of Quality” (Pajjiż ta’ Kwalità). He noted that further initiatives focused on quality-of-life improvements will be announced in areas like labor market stability, road mobility, mental health, tourism, and development.

However, the Nationalist Party (PN) has contested a government advertisement aired on TVM, which featured Prime Minister Abela. The PN argues this broadcast violated regulations against airing politically partisan content outside of BA-approved schedules and has requested immediate action from the Broadcasting Authority, warning of further legal action if the issue isn’t resolved by Monday.

Reactions Flow In After 2025 Budget Presentation

Following the release of the 2025 Budget, various stakeholders have voiced their opinions, offering both praise and criticism for the government’s proposed measures.

Budget 2025 Falls Short on Quality Goals – Malta Chamber of Commerce

The Malta Chamber of Commerce, Enterprise, and Industry acknowledged the government’s stated emphasis on "quality over quantity" in the Budget 2025 theme, but criticized the budget’s lack of clear steps to drive economic growth and societal well-being. While the budget includes revised tax brackets, energy subsidies, and social assistance for pensioners and vulnerable groups, the Chamber stated that it primarily encourages consumption without focusing on productivity, competitiveness, or attractiveness for investors.

The Chamber highlighted several areas where it felt the budget missed the mark, citing the need for specific measures to address:
- Productivity and value-added employment
- Skill development tailored to immediate industry needs
- Advanced digitalization and innovation
- Improved planning and maintenance of public spaces
- Sustainable tourism, waste management, and infrastructure
- Overpopulation, traffic management, and better construction oversight.

Although the Chamber welcomed the introduction of an auto-enrolment occupational pension scheme, it noted that incentives for private employers remain lacking, putting them at a disadvantage in the labor market compared to the public sector. Additionally, it criticized the lack of funding for necessary reforms in public procurement, essential for improving governance and accountability.

While the Chamber praised the government’s acknowledgment of issues like traffic congestion and construction abuses, it stated that a strategic long-term vision, rather than an annual financial exercise, is needed to address Malta’s pressing challenges effectively.

Education and Work-Life Balance Still Lacking – Malta Union of Teachers

The Malta Union of Teachers (MUT) responded positively to the Budget’s support for the Sectoral Agreement with the government, the Education Strategy 2024-2030, and the newly announced Forum for Education. However, it noted disappointment at the lack of measures to address increasing school populations and calls for initiatives to enhance work-life balance for teachers, specifically the right to disconnect. These were among the pre-budget proposals MUT had submitted, which they expected to see addressed in this budget.

“Positive Shift Towards Sustainable Tourism” – Malta Hotels and Restaurants Association (MHRA)

The Malta Hotels and Restaurants Association (MHRA) praised Budget 2025 for its focus on sustainability, infrastructure, and social measures that strengthen the tourism sector. The budget’s increased allocation for sustainable infrastructure and improved public spaces aligns with the MHRA’s goals for enhancing visitor experiences and promoting eco-friendly practices. MHRA noted a boost to the Malta Tourism Authority’s funding to expand marketing efforts and acknowledged the government’s commitment to quality over quantity, even as the country’s hotel bed supply increases.

The association also supported the budget’s focus on workforce development through upskilling and the new Skills Pass initiative, though it recommended extending this initiative to other economic sectors. MHRA emphasized that effective enforcement and wage regulation in line with the unique dynamics of the hospitality sector are essential to maintain high standards across the industry. The increased tax bands, which are projected to retain €140 million within the economy, are expected to positively impact the tourism and hospitality sectors, creating further opportunities for economic growth.

ADPD Criticizes Rising Public Debt and Missed Opportunities

The Green Party (ADPD) expressed strong disapproval, claiming the government’s theme of “A Country of Quality” does not match the reality of increasing public debt. ADPD acknowledged the need for debt during the pandemic to protect jobs and sectors but argued that the government has since continued excessive spending without future-oriented investments. The party criticized subsidies on fossil fuels and road expansion projects, which it believes contribute to pollution and over-reliance on cars.

ADPD urged the government to prioritize high-value sectors like renewable energy, life sciences, advanced manufacturing, and digital transitions, arguing that the budget lacked incentives in these areas. It called for strategic investment in clean industries, mass transit systems, and innovative infrastructure instead of supporting low-paying jobs and unsustainable subsidies.

The party concluded that the budget’s focus on short-term gains undermines long-term quality of life and sustainability, leaving a legacy of national debt that will burden future generations.

Tax Bands and Cost of Living Concerns – Arnold Cassola

Independent candidate Arnold Cassola welcomed the widening of tax bands, which will leave an estimated €450 annually for each working person, and praised the additional €250 increase in children’s allowances per child. However, Cassola raised serious concerns about whether these adjustments would effectively counteract Malta's rapidly rising cost of living, which is putting pressure on staple food prices, housing, and essential goods. He questioned whether this increase would genuinely ease financial strain on families and noted that taxing the minimal €5.25 COLA increase for cost-of-living adjustments could disproportionately impact vulnerable populations.

Cassola also criticized pension gaps, pointing out that around 26,000 pensioners born before 1962 will continue to receive €61 less per week compared to those born after, despite incremental adjustments. Additionally, he highlighted concerns for future pensioners, noting that younger Maltese citizens will need to pay an extra year of National Insurance to qualify for full pension benefits. His critique extended to larger questions about quality-of-life promises made in the budget, suggesting that core societal issues like traffic, construction, and air quality are unlikely to see immediate improvement.

Mandatory Union Membership and Worker Support – UHM CEO Josef Vella

UHM Voice of the Workers CEO Josef Vella expressed frustration that mandatory union membership for low-income workers, an item in the Labour Party’s electoral manifesto, was omitted from the budget. Vella argued that this represents a missed opportunity for the government to support workers effectively, as many employees are struggling to make ends meet. Although the tax reductions are a welcome aid, Vella noted that they fall short for the 165,000 people earning under €19,000 annually, who still face significant financial pressures.

Vella also expressed disappointment over the lack of consultation on the additional year of national insurance contributions required for those born post-1976, calling it “dangerous” to impose employment extensions without social partner input. Furthermore, he advocated for a more robust second-pillar pension system and questioned the effectiveness of the government's proposed new pension model, which he described as a hybrid approach lacking clarity on its application for private-sector employees.

GWU Praises Budget for Worker Benefits and Social Support

The General Workers’ Union (GWU) expressed satisfaction with the budget, highlighting the government’s adoption of several of its proposals, particularly those aimed at supporting Malta’s vulnerable populations. The union praised measures like the continued subsidy on energy, fuel, and cereal prices, as well as enhancements to tax bands, pensions, and in-work benefits. GWU Secretary General Josef Bugeja emphasized that the economic growth generated under this budget framework would enable increased support for workers and communities without additional taxes.

The GWU also voiced approval for the government's commitment to occupational pension schemes and applauded amendments to Wage Regulation Orders aimed at promoting wage parity. In its statement, the GWU concluded that the budget’s allocation of €550 million to support citizens and sustain economic growth reflects a balanced approach that benefits the nation.

Chamber of SMEs Calls Budget One of ‘Continuity’ with Limited Support for Businesses

Malta's Chamber of SMEs characterized the 2025 Budget as one of “continuity,” acknowledging the essential continuation of energy subsidies and measures promoting work-life balance for the self-employed. While welcoming the widened tax brackets, the Chamber noted its disappointment that its proposal to reduce the business tax from 35% to 25% was again ignored, a situation it argues disadvantages local companies relative to foreign-owned businesses taxed at an effective 5%.

The Chamber further voiced concern over the government's limited response to critical business challenges like job-skill mismatches, recruitment difficulties, and infrastructure needs, which it contends are essential for enhancing productivity and competitiveness. It called for more decisive action on these issues to better support Malta’s economic sustainability.

GTA Highlights Need for Enhanced Infrastructure in Gozo

The Gozo Tourism Association (GTA) acknowledged the budget’s attention to Gozo’s unique characteristics but expressed disappointment over the lack of investment in vital infrastructure projects, including the acquisition of a fourth ferry and upgrades to Mġarr Harbour. Although the budget introduces welcome investments in heritage sites and the Gozo Carnival, GTA argues that greater focus on Gozo-specific needs is essential for a sustainable approach to tourism that prioritizes quality over quantity.

MUMN Welcomes Tax Revisions and Health Investments

The Malta Union of Midwives and Nurses (MUMN) described the 2025 Budget as beneficial, particularly for workers and patients. MUMN welcomed the revised tax bands, which are expected to increase disposable income, and appreciated the budget’s attention to vulnerable groups, particularly pensioners and low-income earners. In the healthcare sector, MUMN commended plans to upgrade critical facilities, such as the Emergency and ITU departments, though it reiterated concerns about the limited capacity in hospitals and the need for continued investment in health infrastructure.

MUMN also lauded the government’s initiative to subsidize gym memberships for youth, which it suggested could foster a healthier population over time and potentially reduce healthcare demands. The union encouraged the government to consider extending such incentives to older demographics to promote wellness across all age groups.

The reactions collectively underline mixed sentiment toward the 2025 Budget. While stakeholders commend measures to alleviate financial burdens and promote social support, there is a recurring concern that the budget falls short in addressing Malta’s long-term economic and infrastructure needs. These responses highlight a significant tension between the government’s stated focus on quality of life and the perceived gaps in sustainable development and support for Malta’s business and working communities.