It is safe to say that Monday evening was characterised by a hive  of activity in most accounting and legal firms. Certainly, teams of professionals were busy at their desks following the budget speech being given by the Finance Minister Clyde Caruana, and subsequently preparing  their interpretation of the budgetary measures announced.

All of them would have been eager to understand further which direction the country intends taking  during  the year ahead; which economic sectors the government planned to support, and what budgetary measures would be proposed to attain the country’s economic, social and environmental goals.

It is probable that, in the early hours of Tuesday morning, as these same professionals were walking back to their parked cars, they not only felt exhausted but also to some degree disappointed, namely because questions which local businesses  have been asking time and time again, have remained unanswered.

The introduction of social measures, the reduction of the country’s deficit, the drive towards fiscal compliance and the expansion of  tax bands are certainly all positive measures. The extension of a number of important fiscal benefits (such as the reduction of duty on property transfers in UCA zones, the reduced rate of duty on donations to one’s children, of business-related  immovable property or on shares in companies), are also welcome measures. At the same time, one can also ask whether it would make more sense for these incentives to become part and parcel of our legal framework,  rather than annual, and hoped for, extensions.

The minister did kick off his address with what one can consider to be very courageous statements. He acknowledged the fact that the country had now become dependent on imported labour,  that this had come at a significant cost to our infrastructure, creating traffic congestion, as well as contributing further  strain on the country’s heath sector.

He did also acknowledge the fact that the expected improvement in productivity, brought about by an increase in  economic activity, was not  experienced at  the level which one would expect and that, therefore, the country had to start to focus on quality rather than quantity.

As a result of such statements, one would have expected to see, within the budget speech, what measures the minister is proposing specifically to attract quality rather than quantity; high value business-added rather than mass production. Regrettably, it is generally felt that the speech did not answer this question.

Moreover, the budget speech did not fully address the issue of what capital injections would be made into the economy to improve the infrastructure, tackle the traffic problem and reduce the strain on our over-stretched health sector. One would have expected a reference to incentives for remote working (where feasible) ‒ measures which would certainly help reduce traffic congestion on our roads at certain times of the day.

Possibly another opportunity to provide clarity to the business community has been lost

In his speech, the minister did also note that the country is negotiating Qualifying Refundable Tax Credits (QRTCs) with the EU Commission. It is believed that these are critical to ensure that in the  current scenario, where the effects of Pillar II on multinationals  are anticipated to be more pronounced, Malta will remain relevant in attracting foreign direct investment. Again, however, we did not receive any insight into what form of QRTCs are being considered by the government. 

It has become quite embarrassing for us professionals in Malta’s financial services sector to have to reply to our international clients’ legitimate questions, that the country is discussing and negotiating QRTCs. International clients want answers and demand certainty, and Malta’s competitors are moving ahead in this area.

There has also been much talk about environmental, social and governance measures, summarised as  ESG. This is not just a buzz word in the business world. This will somehow affect a significant number of local businesses, either directly or indirectly, via their involvement in the supply chain of large qualifying companies. Again, the expectation was that the budget would provide some incentives aimed at tangibly assisting local businesses in this area.

It is indeed positive that the finance minister also reminded us all of the importance  of private pensions, to ensure that we all have a sustainable economic future as we age. Given the importance of this issue, however, the private sector requires assurance as to how the government intends to encourage and set up schemes which would address this issue further. Unfortunately, little was said during the speech on this aspect as well.

Courageous statements as part of the introduction to a budget speech are certainly welcome. They make the listener feel that the concerns   of society,  and of the private sector as a stakeholder, are being addressed.

However, there is a feeling that possibly  another opportunity  to provide clarity to the business community and to address issues which could make an important difference to our country’s economic future has been lost.

Paul Giglio is tax and assurance partner at Forvis Mazars.