Budget 2021 

The Budget at a glance

20th October 2020

Government said that while supporting existing economic sectors, this budget will serve as a push to attract new economic niches

Economic and financial outlook

Government has launched Budget 2021 with the theme “Strongly Moving Forward” covering a total expenditure of over €5,700 million. In its economic analysis, Government is anticipating a drop in 7.4% in the GDP, rebounding by 6.4% in nominal terms in 2021.

The main areas of growth are expected to be mainly investment (7.5%), private consumption (3.7%) and exports (5.5%). Public consumption, however, is expected to drop again slightly (1.2%) even next year.
Unemployment is expected to be stable at around 4% in 2021. Inflation is expected to remain stable at 1.3%.

COVID-19 has dealt a significant hit to government finances, both in terms of reduced income as well as through increased government spending which will continue through next year to help ease the negative impact of the virus.
Malta’s debt ratio is expected to be at 58.1% next year, and despite increases, will remain below 60% until 2023. This year, Malta’s deficit will shoot up to 9.4%, before being lowered to 5.9% in 2021. This flexibility was allowed by the European Commission which suspended its fiscal requirements for 2020 and 2021, giving national Governments more room for manoeuvre.

Government said that while supporting existing economic sectors, this budget will serve as a push to attract new economic niches, including in the fields of Virtual Reality, Augmented Reality, AI, Immersive Technology, 3d printing, Quantum and High-Performance Computing.

Key Measures

Economic Regeneration measures

Second set of vouchers: Every resident over the age of 16 by end 2020 will be receiving €100 worth of vouchers, €60 in hotels and catering establishments, the rest in other retail businesses. Vouchers will consist of €15 and €10 denominations.
Wage supplement to be retained: This support to business, which provides eligible operations up to 800 euro for every full-timer, will be extended until March 2021. While no new sectors to benefit from this scheme were
identified, Government said that the way this scheme will operate will be reconsidered to take into account business turnover.

Transfer of Businesses: The 1.5% tax concession on the transfer of businesses has been extended by a year, a scheme which is expected to cost Government coffers €7.5m.

VAT Exemption: The threshold for VAT-exempt businesses from €20,000 to €30,000.

Business

Schemes to support business start-ups, will be launched. These will be targeted at encouraging more businesses to move their operations and sell their products online and to help companies attract new foreign investment.

Technological investments: A new scheme to support businesses in making technological investments which improves their operations and to help them identify new markets while employing qualified people to sustain their business. This will cover up to 50% for a maximum of EUR 200,000.

Extension of existing schemes: Government has announced the extension of Micro Invest; the Business Development and Continuity Scheme; the Research & Development 2020 Scheme; the R&D Feasibility Study Scheme and the Business Start Scheme.

Tourism

Incentives package to promote Malta as a tourism destination
Addressing Seasonality: Financing of the organisation of a number of events throughout the year to reduce seasonality

Design Contest for the Regeneration of a number of tourism zones

Property

First-time buyers: Government has extended the first-time buyers scheme, raising the value for the application of reduced tax from €175,000 to €200,000

Reduced duties announced in Spring’s Mini-Budget on property purchases will be extended to March 2021 for promise of sale agreements and until the end of 2021 for the signing of contracts of sale

Employees and Pensioners

Vacation leave: An additional day added to vacation leave to make up for public holidays which fall on weekends.

Tax refunds: For the fourth consecutive year, Government has announced a tax refund, with those earning up to €60,000 getting the lowest refund of €45. This rises to a maximum of €95 for the lowest earners.

The Cost of Living Adjustment will be €1.75 per week, reflecting the low inflation rate registered over the past 12 months. As in recent years, this increase will be given to all employees, pensioners and people on social benefits. Students will also see the COLA increase reflected in their stipends.

For pensioners, there will be an extra €3.25 per week increase, which guarantees an increase in their pensions of €5 a week.

Public sector workers will receive compensation for past injustices – a €9 million budget has been allocated for this particular commitment.

Social measures

Children’s allowance: Persons or couples earning less than €25,300 a year will get an increase of €70 per child in their children’s allowance, with the allowance rising from €450 to €500 for families which earn more than that amount.

In-work benefit: This benefit has been raised from a maximum income of €18,200 per year to €23,000 per year for single parents and from €26,000 to €35,000 for couples.

Foster care allowance: increased by €10 a week. New or improved grants: Government has announced the introduction of a €1,000 grant to couples who adopt a child locally and a €300 grant for parents who have to quit work to care for a disabled child older than 16. An additional grant of €150 will be handed to families receiving supplementary allowance.

Free bus card (Tal-linja): All persons aged 70+ will get free transport through a Tal-linja card.
Free Internet for Students: Those students who pursue their studies after secondary education will get one year of free internet.

Environment and Transport

Car scrappage scheme: This scheme will be extended and maximum grant to rise to €7,000

Cheaper licencing fees for cars used only on weekends

Major infrastructure: Continuation of studies for Malta-Gozo tunnel and for a light-rail underground system

Green Bonds: Investors will be supported in issuing Green bonds in support of renewable projects and projects which reduce pollution

Plastics: Importation of products using single-use plastic will be banned as from 2021 while sales of such products will be banned from 2022.

This is summary is brought to you with the help of Ci Consulta - CDEIU.

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The Budget at a glance