The government will focus on the environment, living standards, sensible spending and economic growth in the next budget, and while there will be no new taxes, there will be a clampdown on tax evasion, the finance minister said on Tuesday.
Speaking in a pre-budget discussion with the social partners, Clyde Caruana reiterated the government's plan to halve the public deficit to 5.2% next year after it ballooned as a result of COVID-related spending.
That, he said, would happen thanks to increased revenue from economic growth, reduced spending on COVID measures and a clampdown on tax evasion, particularly VAT.
The current deficit in public finances stands at €1.6 billion, or 12 per cent, far higher than the 5.9 per cent that was originally projected for 2021. But Caruana said the debt situation is well under control.
“As long as we continue to be cautious, we do not need to increase tax burdens on families,” Caruana said.
The pandemic, he said, had over the past two years cost the country €1.5 billion both in terms of spending and loss of earnings.
The minister said the government would have to shore up public finances to ensure future generations can face challenges as comfortably as the country had handled COVID-19. To do this, it would focus on job creation.
The minister was launching a pre-budget document, entitled ‘What sort of country do you want to leave behind for your children?’.
Set for October 11, this will be Caruana’s first budget since taking over the Finance Ministry last year.
What to expect in 2022
The document says the budget will focus on the environment and "liveability", sensible spending and quality growth, with a push against tax evasion.
According to the document, in 2021 growth is expected to be driven mainly by the recovery of exports and investment supported by the government stimulus measures.
Consumption is expected to recover more gradually during 2021 and more strongly in 2022.
GDP is expected to surpass its 2019 level by 2022.
The pre-budget document says a pick-up of economic activities this year is expected to translate into employment growth of 2.2 per cent. Unemployment is expected to stand at 4.3 per cent in 2021 before declining to 3.9 next year and 3.8 and 3.7 in 2023 and 2024 respectively.
Inflation this year is expected to hit 1.3 per cent, underpinned mainly by oil prices and modest acceleration in services inflation.
Prices are expected to rise further to 1.5 per cent in 2022, as economic activity continues to recover. Prices will further increase by 1.6 and 1.7 per cent in 2023 and 2024.
FATF Action Plan
The document says Malta’s authorities are “incessantly” working to address an action plan agreed with the FATF after the global watchdog placed Malta on its grey list of untrustworthy jurisdictions.
A number of milestones, the document says, have already been hit including the sharing of information between regulatory and law enforcement entities and an outreach with the private sector to improve the quality of suspicious transaction reports, particularly those related to tax matters.
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