Tax revenue drop in February was caused by major early payment in December

A sharp drop in income tax revenue recorded in February was only the result of a large payment having been made three months earlier and the government’s financial performance or targets were not affected,  Finance Minister Clyde Caruana told parliament on Wednesday.

“Projections actually show that the government’s revenue this year will be higher than projected," the minister said, adding that the deficit would be comfortably below what had been targeted. The national debt would also drop below last year’s.

By next year, he said, the deficit would be comfortably below 3%, the level established by the European Union. The national debt would also fall to about 50% of GDP with the government continuing to target 40%.

Caruana observed that questions had been raised when tax revenue in February declined by €180 million. But this was a cash management issue. The decline in February was due to a major early payment which saw income tax revenue in December rise by €369 million to € 617 million in that month alone. That early payment had boosted government finances and enabled it to delay the issuing of bonds by two months.

In his address, Caruana said the economy was continuing to grow strongly and the government would stick to its policies, including retaining power subsidies and other forms of assistance, despite pressure from within the EU. Malta’s answer, he said, was fully observing the Economic Governance Framework.