The need for tax cuts

The last time tax rates were drastically reduced was during the Lawrence Gonzi administration in 2012. 

The substantial reduction was done over a span of three years. 

Since then, matters have changed drastically. The sharp increase in the cost of property and rent, among others, has caused a tremendous strain on one’s disposable income.

A few years ago, a salary of € 30,000 was considered as a very good salary. This is no longer the case.

Over the last five to seven years, the cost of renting and property has increased considerably. For example, a monthly rent of €400 a few years ago has now increased to at least €800, which translates to an annual increase of €4,800.

Which salary has increased by €4,800 per annum? Certainly not the minimum wage.

This is all very good for the landlord, property owner and the taxman whose revenues from rentals and property sales must have soared.

However, it verges onto the desperate for low wage earners. 

The only way one can compensate for this decrease in the value of salaries is by decreasing the income tax rates substantially. This is the only measure that will increase one’s disposable income.

I propose the following tax rates for individuals who apply ‘single’ tax rates (see table).

Proposed new tax bands

Naturally, the tax rates for those applying ‘married’ and ‘parental’ rates will be adjusted accordingly.

National insurance contributions – self-employed

A self-employed individual who earns an annual net profit of €27,000 pays the highest NI contributions, a weekly rate of €79.84 or, rather, €4,232 annually (this year, 53 contributions must be paid). 

Thus, an individual who earns €27,000 or €50,000 or even €100,000 pays the same rate of NI contributions. 

A monthly rent of €400 a few years ago has now increased to at least €800- Noel Muscat

In all fairness, the individual who earns €27,000 will receive the same pension as the one who earns €100,000. 

However, the strain on the individual who earns €27,000 is simply too high and discouraging.

To date, a self-employed individual is not allowed to enter the total NI payments paid as expenses in the annual profit and loss account that they prepare.

So, to alleviate the burden of the annual NI charge, I suggest that a self-employed individual should be allowed to enter the NI cost as an expense in the annual profit and loss account. Using present tax rates, this may save a self-employed person a maximum of €1,481.

We should encourage entrepreneurship. We need to help start-ups and micro-businesses. As things stand, one is discouraged from taking the important plunge. 

We must help entrepreneurs. It is our duty to help them. We need to reform courageously. Now is the time.

Noel Muscat, an accountant by profession, is the mayor of Swieqi.