Chamber of Commerce wants tax bands revised, company cap on non-EU workers

The Chamber of Commerce is calling for a revision of tax bands to mitigate against wage erosion caused by higher inflation in its budget proposals.

But it also warned that a €13 per week wage rise determined by the Cost Of Living Adjustment would cause labour costs to increase significantly and further fuel inflation.

The Chamber said higher labour costs will lead to Malta’s exports, including tourism and financial services, becoming less competitive.

“With the persistently high inflation that we are experiencing, it is imperative to find ways of improving the purchasing power of lower income groups while minimising increases in labour costs to slow down the wage-inflation spiral,” the Chamber said.

The document published on Tuesday contains more than 250 proposals ahead of Budget 2024 that will be presented by the Finance Minister on 30 October.

Chamber President Chris Vassallo Cesareo (left) and CEO Marthese Portelli

In their introduction to the document, Chamber President Chris Vassallo Cesareo and CEO Marthese Portelli said the country must take “bold decisions even if they may be unpopular and challenging to implement”.

They highlighted structural problems in the labour market, transport, urban planning and waste management as issues that had to be tackled with “immediate urgency”.

They said the country had to address other fundamental strategic areas like the uptake of digitalisation and the transition to environmental sustainability.

However, they also insisted that to achieve this Malta had to embrace good governance and ensure transparency and accountability.

“For ethical businesses to keep investing, they need to be reassured that they are operating in a country that has an agile administration that puts enforcement and integrity at the very top of everything it does,” they said.

Government should absorb COLA increase

To mitigate against the negative impact of the COLA increase on competitiveness, the Chamber called on government to absorb part of the wage increase.

It also called for a revision of the tax bands to compensate for the additional tax that will be paid on COLA increases. It said any planned tax refund cheques should be incorporated into the revisions to improve the monthly take-home pay of employed people.

It also called for the correction of an anomaly in tax progression that was introduced when tax bands were tapered with the introduction of the second 25% tax band with a lower subtracted amount in the tax. This anomaly, the Chamber said, had the effect of a very high marginal tax rate on pay rises that shift employees from the first to the second 25% tax bracket.

Another proposal is to eliminate the disincentive for the second spouse (often the female) from taking up gainful employment by revising income tax categories such that working parents benefit from married tax rates irrespective of whether their spouse is in gainful employment or not.

The Chamber said the existing reduced tax rate on overtime hours for full-time employees should be extended to all overtime hours not just the first 100 hours.

Public sector and pensions

To reduce public sector expenditure and improve efficiency the Chamber is proposing an independent audit of government job roles and responsibilities to identify areas of duplication, streamline processes and eliminate unnecessary bureaucratic layers to improve efficiency and reduce costs.

It said any surplus personnel identified in the audit should be seconded to the private sector through incentive programmes. “A job with government cannot continue to be perceived as a cushy job for life,” the Chamber said.

It also called for the elimination of summer half days for public sector departments, which it said are “inconvenient for business and disincentivise people from moving to the private sector”.

On pensions, the Chamber is calling for an update to the cap on pensionable income, exempt all statutory pensions from taxation and allow those who retire early from full-time employment to work part-time.

Cap on Third Country Nationals

The Chamber is calling for a Blue Card system for skilled professionals and a cap on the percentage of non-EU nationals a company can employ

While reiterating its stand against businesses who unlawfully exploit foreign workers, the Chamber is proposing the introduction of a Maltese Blue Card for skilled professionals with criteria that include a minimum salary requirement of €40,000, a specified maximum residency duration, facilitation of relocation of family members and the possibility to change employer within the country within the same profession.

It also called for the introduction of a cap on the percentage of Third Country Nationals a business can employ at any point unless it is operating in healthcare or the provision of essential services such as waste management and public transport.

The Chamber also proposes a monthly quota per company for TCN applications proportional to the number of employees registered with Jobsplus.

TCNs should be allowed to change employer freely once given permission to work in Malta thus preventing abuses and improving retention within the labour market.

Transport and parking

The Chamber also called for the introduction of an e-mobility wallet with government allocating an annual amount to every e-wallet for use by commuters on sustainable and shared transport options.

It called for the introduction of parking fees in central urban areas and the conversion of on-road parking spaces to new multi-storey underground parking spaces and regional underground mass parking facilities.

It also called for a gradual phase out of petrol and diesel subsidies and a revision of vehicle road licence fees to reflect actual usage.

The full report can be accessed online at the Chamber of Commerce.