Issue link: https://maltatoday.uberflip.com/i/1547021
2 maltatoday | WEDNESDAY • 7 OCTOBER 2026 NEWS Caruana: New taxes possible, but VAT, income tax, and social security untouched Finance Minister Clyde Caruana confirms this year's COLA is expected to be around €5, although the final figure will be determined in the coming weeks FINANCE Minister Clyde Caru- ana did not rule out introduc- ing new taxes in the upcoming Budget, but said VAT, income tax, and social security rates would remain unchanged. Speaking during a live inter- view with Times of Malta, Caru- ana gave a look into the next Budget scheduled for 26 Octo- ber. While noting the possibility of introducing new taxes, the finance minister vowed not to touch VAT, income tax, or so- cial security in his efforts to raise revenue. However, he did not exclude increasing tourist taxes. "I'm looking at a handful of things that, I think, by being ad- justed, will be widely accepted," Caruana said, highlighting the importance of being bold and open-minded. "I'm not going to touch VAT, income tax, or social security," he underlined. "But it's high time to take certain decisions that the people at large are pushing the political class to consider." He explained that together, the three make up for 80% of Malta's revenue. Caruana added that "elimi- nating fat" through all ministry budgets has left some ministers unhappy with him, but insist- ed that this is a natural process which must take place in every legislature. Energy subsidies Caruana insisted that energy subsidies will remain in place and will not be capped, saying the policy will continue even if it encourages some waste in order to avoid disrupting Malta's econ- omy. "We're probably wasting €20 million," he admitted. "But the opportunity cost is much higher." The finance minister said the deficit is expected to rise to 2.8% this year, pointing to the cost of ongoing energy and fuel subsi- dies, which he said will account for around half of the total deficit. "Even that shows that the econ- omy is under control, because if it wasn't for the energy crisis, our deficit would be as low as 1.4%," he said. While the figure is higher than previously forecast, Caruana stressed that Malta must remain below the European Union's 3% deficit threshold. He said he expects the deficit to remain at around the same level in 2027. Caruana said the energy crisis, which has so far cost €1.35 bil- lion, has posed a greater econom- ic burden than the COVID-19 pandemic, which cost the coun- try around €800 million. Govern- ment is forecasting a further €400 million in energy subsidies by the end of 2026. "The war [in Iran] has been pro- longed, externalities are getting worse and it's highly likely that this winter will be challenging," he said, adding that his colleagues had not done enough to commu- nicate the scale of the problem to the public. However, Caruana said energy prices "won't shoot up forever," arguing that prices will eventually begin to fall. He noted that some countries have already turned back to coal. "High energy prices will bring some economic slowdown and inflation. If that happens, cen- tral banks will increase interest rates. So even the demand side of things will reach an equilibrium eventually. Economies cannot sustain these high prices forever." Super bonus and COLA Asked about government's promised €1,000 super bonus, Caruana said its inclusion in the upcoming Budget remains a "work in progress." He said the measure was de- signed as an alternative to a tax cut, arguing that simply adjusting tax brackets would leave around 75,000 taxpayers either excluded or receiving only a limited bene- fit. "I came up with the idea of the super bonus myself," Caruana said, adding that he fully supports the proposal. He also confirmed that this year's COLA is expected to be around €5, although the final figure will be determined in the coming weeks. Population reduction and private investment Caruana said Malta's popula- tion is projected to reach 800,000 by 2040, placing much of the responsibility for curbing that growth on employers rather than government. He explained that businesses generally rely on either cap- ital or labour to increase pro- duction. While workers are increasingly difficult to find, labour remains cheaper than investing in capital, meaning employers often continue to ex- pand their workforce instead. "If you want to increase pro- ductivity, you need to have more capital and less labour. That's on the employer. It's a difficult thing to do, it's easier said than done. But to wean ourselves off this constant demand for more labour, the only answer is more capital and technology." Caruana said re-engineering Malta's economic model is not like "turning off a switch," stress- ing that shifting production away from labour and towards greater capital investment will take time. The underlying problem, he said, is that demand for work- ers continues to outstrip local supply. Malta's domestic labour supply stands at around 3,000 workers a year, while demand exceeds 10,000. Caruana also acknowledged that housing will remain a chal- lenge as the population grows. At the same time, he said gov- ernment wants to ease the fi- nancial burden on parents and encourage families to have chil- dren. In this context, he referred to tax cuts which he said could save middle-income earners around €220,000 over 21 years. Malta's traffic problem and the promised metro Amid worsening traffic con- gestion and growing pressure on public transport, Caruana said he remains unsure whether gov- ernment can afford its promised metro system. The finance minister, who himself arrived late to the Times of Malta interview after getting stuck in traffic, said studies ref- erenced by his government col- leagues during the election cam- paign have yet to reach his desk. "It was said that building it would cost up to 30% or 35% of GDP. When we fix a stretch of road that's meant to cost €1 mil- lion, it turns out to cost much more," Caruana said. "I'm not trying to pour cold water on the idea, but I'm say- ing I need to see some numbers. These promises can only mate- rialise if they make numerical sense." KM Malta Airlines and 'hidden agendas' Asked about KM Malta Air- lines' accounts, which have not been published for more than two years, Caruana suggested there were "hidden agendas" aimed at undermining the na- tional airline. "Someone recently said he has gravel in his shoes," Carua- na said, referring to comments made by Joseph Muscat follow- ing Yorgen Fenech's acquittal. Caruana said the airline's ac- counts would be published, but stopped short of giving a time- line. "The accounts will be made public. I will say what I have to say about the airline when the time is right," he said. "I will even invite the opposi- tion for a debate, for as long as necessary, to explain what has happened throughout time. But that only happens when the time is right." Tax evaders be warned Caruana warned that "a few hundred letters" will be sent to suspected tax evaders in the coming weeks, following the in- troduction of a new AI-powered system and a €6 million IT plat- form. He said authorities will focus on two main categories of sus- pected tax evasion: people who declare an income below the minimum wage despite other reported figures suggesting oth- erwise, and those who acquire significant assets while consist- ently declaring a much lower income. EVA BRANNON ebrannon@mediatoday.com.mt Finance Minister Clyde Caruna spoke during an interview with Times of Malta (File Photo)