Good for business

From a business point of view, the budget was a good one. It is good news that the Microinvest scheme will be extended for another two years and that more businesses can now benefit from these tax credits. I myself have used these tax credits in the past and I can attest to the fact that they help small businesses to invest and grow, which is a good thing all round for our economy.

I also really liked the BStart scheme announced by the Minister - details are still to emerge however the general concept is positive since it will encourage established businesses to take an entrepreneurial stance and invest in new start-ups. This drive towards encouraging entrepreneurship is also reflected in the action plan targeting children in primary and secondary schools and the Youth Entrepreneurship Act, which will hopefully encourage our children to think outside the box when the time comes for them to start their working life.

I also support the government's commitment to tourism, and I believe that projects such as the aquarium in Qawra and the restoration of our cultural and natural heritage will have a positive impact on our tourism product.

The administrative reforms announced in relation to the purchase of property are long overdue. I have myself experienced the frustration of having a government evaluator come to inspect a property a year after I made the purchase, when the value of the house had risen due to the investments I had made in it over the previous 12 months. This ridiculous situation will hopefully be resolved once and for all.

The above-mentioned initiatives and reforms, along with others that I have not mentioned, all make for a good budget for business. The companies that will benefit from these schemes are the motor of the economy and if they thrive, so will their suppliers and employees - in other words so will the rest of Malta.

However, the budget is not only about business, and the Minister's announcements yesterday will impact the pockets and spending power of thousands of Maltese who live and pay tax in the country. On this front, I have slightly mixed feelings.

My family will definitely benefit from a number of the initiatives announced by the Minister, and there is no doubt that we will end up with more cash in hand. With three kids under the age of 10, I can now expect €1,350 to land into my account sometime in the New Year. In addition my husband and I will also be paying less income tax. So I suppose that budget 2013 is a reason to be merry for my family this Christmas.

That said, it does not mean that I necessarily agree with the way the largesse has been distributed amongst families in Malta and Gozo. The table shown above shows the income distribution of people earning over €19,000, who are the ones who are going to benefit from the new tax bands. The workings show the savings based on the single computation bands - this is not accurate because people can opt to file a joint computation or use the parent tax bands. However for the sake of this exercise the figures give a good indication regarding the tax savings in question.

Based on my workings it is clear that the 1,215 people who declare incomes in excess of €50,000 per annum will be receiving the lion's share (over a quarter) of the tax savings. The 28,998 people who declare incomes between €19,000 and €30,000, on the other hand, will also benefit, but their share of the cake will be much smaller. They may be getting 36% of the tax savings, but seeing as there are so very many people in that bracket, they will end up with much less money in hand.

Now I understand that the PN had made an electoral promise that it wanted to keep and that the main aim was to reduce tax to 25% and I have to say that taken from that point of view the government has kept its word - albeit a little late in the day. However I still feel that it would have been more logical to plan the tax breaks in such a way that resulted in larger savings for those who earn less (and who are feeling the pinch) and smaller savings for the wealthy (who by definition are not struggling to make ends meet).

This could have been achieved by widening the tax bands at the lower levels of income. Both low income earners and high income earners would have benefited from such a scheme, but there would have been more of an impact for those earning under twenty-five thousand euros per annum, with some benefits also accruing to those who earn less than nineteen thousand. The great majority of the Maltese working population earn under 25K so such a scheme would have benefited the great majority of the population.

So on the whole my feeling is that the budget was a good one but that the income tax proposal left something to be desired. There is an opportunity here for Labour to come up with a counter-proposal which results in the same savings in income tax but with a more equitable distribution. If planned and communicated wisely, the proposal could be a strong point for Joseph Muscat in the upcoming electoral campaign.