PN pledges sweeping tax cuts for all workers

Updated 3.10pm

The Nationalist Party has proposed a major overhaul of Malta’s income tax bands "over two years", promising significant tax cuts as part of a wider package of fiscal measures unveiled on Thursday.

Speaking during a press conference, Opposition leader Alex Borg pointed out the current tax bands no longer reflected economic realities.

“Today's tax bands are expired,” he said.

The party is proposing new, wider tax bands for all personal tax categories, including single people, married couples, families and parents. The 35% maximum threshold would apply from €80,000 rather than the current €60,000, with new bands for each category and tax reductions across the board.

This reform will lead to tax cuts for workers, the self-employed, families and pensioners, with a guaranteed minimum benefit of €1,200 per year for every worker, self-employed person and pensioner.

One of the most generous proposals impacts families with children. 

A married couple with one child will pay no tax on the first €25,000, 15% up to €37,000, 25% up to €80,000, and 35% only on income above €80,000. A couple with two children will pay no tax on the first €41,000 and 15% up to €55,000. For families with three or more children, there will be a rate of just 15% on income between €41,000 and €80,000.

The proposal would further increase the tax-free threshold for parents with two children by €5,000 beyond the level introduced in the government’s last budget.

Single parents with one child will pay no tax on the first €20,000, 15% up to €32,000, and 25% up to €80,000. A parent with two children will pay no tax on the first €35,000 and 15% up to €48,000. For single parents with three or more children, there will be a rate of just 15% on income between €35,000 and €80,000.

The 15% tax band for parents with two children will go up from €42,000 under the current government’s plan to €48,000 according to the PN’s pledged reform.

PN’s spokesperson on finance, Adrian Delia, explained how the changes would affect workers. He said that someone earning €30,000 could benefit from a tax reduction of up to €2,000 a year. A person earning €40,000 could save up to €4,000, while someone on €60,000 could benefit from a reduction of up to €6,000 a year.

These measures are expected to impact about 300,000 workers and, according to the PN's calculations, would "give back back between €230 million and €265 million per year directly to Maltese families once fully implemented."

"Since it will be introduced gradually over two years, the initial cost will be around €110 million to €130 million per year," Borg said.

He added that these savings would lead to more domestic consumption of around €200 million per year, which in turn will generate between €50 million and €70 million in additional revenue through VAT, National Insurance and other taxes.

No tax on COLA

This was one of six proposals unveiled by the PN on Thursday morning.

The PN also proposed to make cost-of-living adjustment increases tax-free by raising tax bands in line with COLA.

Delia said that if COLA amounted to €300 a year, the tax bands would also increase by €300.

The party also pledged to make the first €10,000 earned from multiple part-time jobs, as well as overtime income, tax-free.

Another proposal concerns families who host foreign students. The party said income from hosting students would become entirely tax-free.

Parents and grandparents who give up working to host foreign students would also receive a maximum of three years of National Insurance credits for each year they host students. This measure is expected to cost around €500,000.

The party also pledged to give all adults over 18 a €1,000 Digital Skills Wallet to use on training courses. This measure is estimated to cost around €50 million a year.

Alex Borg reiterated the proposals he made on Wednesday, including a pledge to remove the tax on all inheritance transfers, abolish the succession tax on family businesses, and eliminate the tax on donations of immovable property.

Speaking about his own experience, Borg said his family had faced pressure and stress over inheritance tax after his father’s death. 

“I don’t want this injustice to continue, that’s why we are determined to get rid of it.”

The PN added that the inheritance tax measures would cost between €45 million and €55 million to implement.

Delia said the party would finance the measures through the development of new economic niches such as the proposed Mediterranean Maritime Fuel Hub which alone is estimated to generate around €450 million in the economy in its first three years.

Other new economic niches such as Data, AI and New Space are expected to generate around €100 million in the first five years while investment in the creative economy through the PORT – Cultural District project in Marsa, with an investment of around €350 million, should generate a revenue of around €110 million per year, the PN added.