PN proposes raft of tax cuts for small businesses, doubling of VAT exemption

The Nationalist Party has announced a package of tax and business proposals targeted at small and medium-sized businesses, including lower corporate tax rates and doubling the VAT threshold.  

At a press conference on Friday morning addressed by Alex Borg, Adrian Delia and David Pace Ross, the party said corporate tax for micro enterprises – those employing 10 people or less and with turnover of not more than €2 million - will be cut from 35 per cent to 15 per cent, while SMEs - companies with not more than 50 employees, will have their tax rate reduced from 35 per cent to 25 per cent.  

The changes would apply with a tapering system, so businesses are not penalised as they grow. Borg said the PN was cutting taxes across the board "so nobody is left behind." 

Delia said micro enterprises and SMEs made up around 99 per cent of Maltese businesses and formed the backbone of the economy.  

"These reductions are not simply tweaks but strong incentives intended to give businesses “breathing space” and encourage growth. 

PN also revealed it would raise the VAT exemption threshold from €35,000 to €70,000. 

“This would mean more businesses qualifying for VAT exemption and less bureaucracy, including less time spent filling in VAT forms,” Delia said, adding the measure would affect between 3,000 and 4,000 businesses. 

The Opposition also proposed that training, reskilling and upskilling for workers would be fully funded by the government. Approved courses would be subsidised to help businesses adapt to rapid technological and economic change. 

PN said it would create an affordable rent scheme for small businesses needing industrial space, saying it would carry out an inventory of government-owned industrial property to identify vacant spaces that could be used for economic regeneration. 

Measures for voluntary organisations

Turning to proposals aimed at supporting NGOs and voluntary organisations, David Pace Ross elaborated on proposals announced on Thursday evening. He said such organisations would benefit from a 100 per cent VAT refund on goods and services directly related to their work. 

“The aim is to reduce the financial burden on organisations that play a role in local communities and Maltese identity,” he said. 

PN also proposed a 30 per cent tax credit on donations to NGOs and VOs up to €50,000 per year. 

Pace Ross reiterated a proposal that would allow NGOs and voluntary organisations using government-owned rented property to eventually buy it. He said this would allow them to operate with greater peace of mind and avoid the risk of being evicted from premises. 

The party said this would be subject to clear rules, criteria and good governance requirements. The property would have to remain tied to community use and could not be turned into a commercial asset. 

Asked how much the business tax measures would cost, Delia said the direct cost would be between €40 million and €110 million, while the net cost would be between €55 million and €95 million. 

Delia was also asked whether the PN would need to cut costs from certain sectors to be able to pay for the pledges announced so far, he replied that the government wasted money in the form of direct orders, the salaries of person of trust and bloated budgets such as that related to Vision 2050.

Borg and Delia continued to defend the figures behind the PN's tax cut proposals announced on Thursday, with the latter hitting back at Clyde Caruana’s critique of his calculations.

He said the PN’s estimate that its tax cuts will cost €110m - €130m is a “net” calculation that factors in the economic multiplier effect the cuts will have. 

However, neither Borg or Delia committed to publishing a step-by-step breakdown of their calculations, insisting their data came from sources such as the NSO and CFR and that all their proposals were fully costed.