Issue link: https://maltatoday.uberflip.com/i/1418522
14 maltatoday | TUESDAY • 12 OCTOBER 2021 BUDGET2022 NICOLE MEILAK MALTA can expect its real GDP levels to rise by 4.8% at the end of 2021, according to government forecasts in the Budget 2022 estimates. By December, the government deficit is expected to stand at 11.1% - a downward revision compared to the 12% forecasted in April this year. In the initial pre-budget document, gov- ernment predicted Malta's debt-to-GDP ratio to increase and potentially reach 65% by end of year. However, in the updated budget docu- ment, the 2021 debt-to-GDP ratio will rise to 61.3%. In 2022, the government deficit is expect- ed to contract to 5.6% of GDP. The debt- to-GDP ratio will stand at 61.8%, and real GDP will grow by 6.5% compared to 2021 levels. Under the EU's Stability and Growth Pact, Malta's budget deficit cannot ex- ceed 3% of GDP, while national debt cannot surpass 60% of GDP. However, the European Commission activated a general escape clause that allows Mem- ber States to in effect deviate from these benchmarks temporarily to promote economic recovery during the COV- ID-19 pandemic. The finance minister estimates that the pandemic contributed to 25% of Malta's debt-to-GDP ratio. In his budget speech, the minister noted that Malta was one of the few EU countries that kept the labour market intact, by in- creasing the number of employed people and reducing economic inactivity. He said that the employment rate in the first quarter of 2021 rose to 77.3% com- pared to the 76.8% registered in 2019. Con- versely, the unemployment rate in August this year fell to 3.2% from 2.6% two years ago. The fiscal situation With regards to Malta's fiscal situation, the consolidated fund's recorded deficit is set to decrease over the years. In 2020, the government's consolidated fund reached a €1.4 billion deficit. The re- vised deficit for 2021 is €1.5 billion. The fund is expected to remain in the red until 2024, but will decrease steadily each year. The estimates indicate a €737 million deficit next year, which will then drop to €697 million in 2023. By 2024, goverment's consolidated fund will report a €491 million deficit. A closer look at the consolidated fund shows that tax income is expected to in- crease consistently until 2024. In 2021, tax revenue constituted €4.4 billion. By 2024, it will rise to €5.7 billion. Recurrent expenditure will similarly in- crease over the years. Government is fore- casting a short dip here, with €3.5 billion spent in 2021 according to the revised esti- mate. It will fall to €5.3 billion in 2022, and rise to €5.6 billion in 2024. Government is further expecting fluc- tuating capital expenditure over the next three years. While this form of expenditure stood at €799 million this year, it will shoot up to over €1 billion in 2023. Deficit to hit €1.5 billion in 2021 €2.2 million spend on GRECO, Moneyval reforms Interest rate on late income tax and VAT for enterprises down to 7.2% Increase in tax refund announced MACRO-ECONOMY REFORMS VAT & INCOME TAX REFUND TAX REFUND SCHEME • Real GDP to grow by 4.8% in 2021 and 6.5% the following year • Deficit will reach €1.5 billion, or 11.1% of GDP • Malta's debt-to-GDP will rise to 61.32% THE finance minister said €2.2 million has been invested in reforms aimed at addressing the recommendations of the Council of Europe's Moneyval and the GRECO (Group of States Against Cor- ruption) commission. A plan of action has been implemented to address Malta's greylistig by the Finan- cial Action Task Force. Planned reforms including strengthen- ing the Attorney General's office to take on more prosecutorial functions together with the Police force, to have the police focus on investigations, and reduce de- lays in criminal investigations. A €15 million colelective agreement will address better work conditions for 5,000 members of the disciplined corps. The community policing service will be extended to Żabbar, Xgħajra, Mar- saskala, San Ġwann, Ħaż-Żebbuġ, Gżira, Misda, Pietà, Mosta, Mġarr, Żurrieq, Safi, and Kirkop. A medical facility for Corradino Cor- rectional Facility inmates is also in the process of being finalised, WITH effect from 1 June 2022, the in- terest rate on late income tax and VAT for enterprises will be set to 7.2% a year. "We want to send a clear and strong message that while we will be helping all those that are faced with economic and fiscal difficulties, we will not toler- ate any unjustified tax avoidance." The pardon system for any late tax payments will only be considered with- in the strict terms of the legal notice of 2013. "It will not be the norm that everyone benefits from a pardon on in- terest". "The government believes that what- ever is needed should be done in or- der to safeguard fiscal morality," said Caruana. FINANCE Minister Clyde Caruana said the tax refund scheme will continue into its fifth year. He confirmed the tax refund pledge will see an increase over the previous year. The highest obtainable refund will amount to €140 while the lowest refund will be €60. The measure will cost government €24 million, and over 250,000 people will benefit from the scheme.