Income tax cuts to cost more than €100 million, Clyde Caruana says

A tax cut to be announced in the forthcoming budget will cost public coffers more than €100 million, Finance Minister Clyde Caruana said.

Income tax bands will be tweaked and every taxpaying worker will benefit from the cut, he said during a business breakfast organised by Times of Malta on Thursday.

The minister did not provide much detail on the proposed tax cut but insisted “all taxpayers will benefit”.

Prime Minister Robert Abela had said the tax cut will be “the biggest in history”. During the 2022 election campaign the PL had pledged that taxpayers would see the non-taxable portion of their income increase by €1,700. The cost of the proposed widening of tax bands was estimated at €60 million and would come on top of the tax refund cheques for those earning under €60,000.

Caruana’s declaration that the tax cut he will announce in the budget will cost in excess of €100 million suggests the exercise will be more generous than what was pledged in the manifesto.

The minister is expected to deliver the budget on 28 October.

During the conversation with Times of Malta editor-of-chief Herman Grech, Caruana said now was not the time for a change in corporate taxes. He said Malta must first agree with the EU on such a reform in line with the global initiative led by the OECD to have a minimum effective tax rate of 15% for companies with a turnover above €750 million.

Caruana said the budget will also see increases in children’s allowance and pensions. He also confirmed that energy and fuel subsidies will be maintained next year and these will cost government 0.7% of GDP, which is significantly lower than the more than 2% of GDP they cost previously.

The Finance Minister said the government will be spending €460 million on energy subsidies, collective agreement increases for teachers, health workers and the public service, tax cuts and an increase in social benefits next year.