Issue link: https://maltatoday.uberflip.com/i/1482478
FINANCE minister Clyde Caruana said Malta's national airline would not be treated as a sacred cow by the European Commission, saying the country could not expect Brussels to bless any undeserved state aid for Air Malta. "For the European Commission there are no sacred cows and will not give special treatment that it has not given to many countries and much larger national airlines," Caruana said. Caruana said Malta had a good working rapport with the EC, with which the country will have to find a solution for the ailing Air Malta while respecting European market rules. "We have made a plan of action to better address company costs. The European Commission is assessing the different options, but I continue to stress that Malta has, and will con- tinue to have, a national airline. "Whatever the result of the next steps, there is much more work to be done for Malta to have an airline that can go from Luqa to another point in Europe, and at least not lose money and be cost-effective." Caruana said Air Malta's losses have been a major challenge in the last two years and blamed other administra- tions for leaving the airline in a posi- tion where it could never be efficient. "Year after year, the government continued to pay tens of millions and this bottomless well instead of solving problems have grown further. Had we continued as we were, the company's financial burdens would no longer be viable and from night to day it would have to cease abruptly." Caruana said it gave him no joy to take hard decisions that are certain- ly not vote-winners. "What is sure is that you can no longer have an airline that burns tens of millions a year in a context that a country like ours, insular and peripheral, must have an airline. These are not things one en- joys doing, but they must be done and I am ready to continue doing them." DEBT-TO-GDP levels are set to remain in line with the EU's sta- bility and growth pact, only going upwards of 60% in 2024 by 0.3 per- centage points. In 2022, debt-to-GDP levels stood at 57%, and is set to go up to 59.1% in the following year. By 2024 it will reach 60.3%, and will dip back down to 60% in 2025. Malta's real GDP growth in com- ing years is set to hover between 3.5% and 3.8% as inflation, but will remain above the EU average. According to Budget forecasts, re- al GDP growth will fall to 3.5% next year, after standing at 6% in 2022. In 2024, it will rise upwards to 4.3%, and fall to 3.8% in 2025. Nominal GDP, which is not ad- justed for inflation, reached 11.3% in 2022, but will also fall to 7.3% in 2023. It will continue downwards and reach 6.1% in 2025. Malta's real GDP growth rate was almost double that of the EU aver- age, which stood at 2.7% in 2022. By 2023, the EU average will fall to 1.5%, compared to Malta's 3.5% growth rate. Inflation is being estimated to subside in the following years. Mal- ta's inflation rate is set to fall from 5.7% in 2022 and 3.7% in 2023. It will go on to dip to 2.6% in 2024, and 1.9% in 2025. The deficit as a percentage of GDP stood at -5.8% this year, and is expected to shrink steadily and reach -2.8% in 2025. Driving this, government spend- ing is set to fall over the years. Spending as a percentage of GDP stood at 36.9%. By 2025, it will fall to 33.7%. Capital expenditure will reach €920 million in 2023, higher com- pared to 2022 levels. A third of cap- ital expenditure is set to be sourced from EU funds. AIR MALTA BUSINESS & TOURISM GDP GROWTH No sacred cow too good for Brussels, Caruana warns Visa programme to be reviewed Debt levels to remain within EU threshold until 2025 12 maltatoday | TUESDAY • 25 OCTOBER 2022 BUDGET2023 THE government will start a review into res- idence programmes such as Malta's global residence programme, which extends 'golden visas' to those remitting their incomes to the island, to reflect international changes taking place in the field of tax residency. Necessary changes will be made to update the law regarding these programmes to ensure that Malta remains an attractive prospect, while ensuring the integrity of such programmes is maintained given current international pres- sures. Business: start-ups and SMEs In 2022, Malta Enterprise assisted 35 start-ups projects with a total investment of €22 million. In 2023, a one-stop shop under the brand Start in Malta will offer assistance services for applications for Malta Enterprise schemes. Malta Enterprise, which manages the Kor- din Business Incubation Centre, will develop, through new European Business Incubation Centre funds, a top-quality facility for innova- tive start-ups that are further diversifying Mal- ta's economy. €40 million will be granted in cash for SMEs under Business Enhance schemes. A committee has been entrusted to develop a right to a basic bank account for businesses, as well as a Credit Review Office facilitating both commercial banks' and their customers' inter- ests in loan applications. Digital Innovation Hub The European Commission will fund Malta's proposal for the Digital Innovation Hub (DIH) project from European funds. DIH aims to provide digital transformation opportunities to SMEs and start-ups, through technologies such as AI, and High-Performance Computing (HPC). Malta Enterprise will double financial as- sistance by way of cash grants for all Maltese companies investing in digital and sustainable projects, covering 50% of eligible investment, up to a maximum of €100,000. Gozitan businesses and start-ups will contin- ue to benefit from additional financial assis- tance of 10% in the form of a tax credit, which can double to 20% if companies invest in pro- jects that reduce their carbon footprint. Tax credits will be doubled for businesses in- vesting within their own companies. A maximum €40,000 tax credit will be avail- able for investment in digital projects, projects that reduce energy and water consumption, or in investments that increase efficiency by re- ducing the waste of raw materials or waste. Malta Enterprise will be developing guide- lines for companies to acquire ESG (Environ- mental, Social, Governance) credentials, with technical support for SMEs. The 2022 scheme to allow pandemic-hit busi- nesses to invest in sustainability rather than having their income taxed, will be extended. Companies that had unabsorbed or can capital allowances in the year 2020 and 2021, due to losses incurred in the pandemic, could apply for a tax reduction against any taxable income from other companies, forming part of the same group, for the year 2022 (assessment year 2023). Rental subsidy In 2021, the rental subsidy incentive was ex- tended to a large number of eligible business- es, with around €700,000 in direct assistance to Maltese and Gozitan businesses. In 2023, Maltese businesses will be able to benefit from financial assistance of €50,000 in rental subsidy incentives, instead of €25,000 per year for the first three years of this assistance. The period in which businesses will be able to benefit from this scheme will be doubeld from three to a maximum of six years. Government will relaunch a scheme for busi- nesses leasing state-owned properties, to re- new 45-year leases. The government has also launched a scheme for families who purchased properties that spilled over onto government land. The scheme offers a property title at affordable prices, while more schemes will cut red tape at the Lands Authority. Social enterprises Following the entry into force of the Social Enterprise Act, a number of benefits current- ly available only to commercial companies will be extended for social enterprised via the Mi- croinvest scheme: a tax credit of up to €70,000 over three years. Tourist Area Development Regeneration Agency As of January 2023, the Foundation for Tour- ism Zone Development will be transformed in- to the Agency for Tourism Zone Development Regeneration. The Agency will continue to fo- cus on the formulation and implementation of regeneration plans, as well as the introduction and implementation of the Town Centre con- cept. By August 2021, the number of tourists coming to Malta reached 81% of the volume reached in the same period in the record year 2019, generating expenditure of €1.3 billion – almost 86% of expenditure during 2019. Together with the Gozo Tourism Associ- ation, an incentive scheme will attract more winter tourism to Gozo for the low season. Industrial land In 2023, INDIS Malta will create new plots for various clusters to meet increasing demands for industrial land, with a pilot project on the manufacturing and aviation sector to address the needs of the industry by assisting in upskill- ing of current workers and training new work- ers. Works on Taxiway Lima, which will continue to assist aircraft maintenance companies oper- ating in the airport area, will be completed later this year. In Gozo, new space will be opened next to the Xewkija industrial area for SMEs to have a workshop space and a parking space for large vehicles.