[WATCH] Restaurant vouchers, fuel and property tax cuts, wedding expenses refund part of €900 million recovery plan

Government unveils ambitious recovery plan that will gradually phase out of wage supplements, invest €400 million in industrial infrastructure, subsidise electricity bills for businesses, cut fuel prices and dish out spending vouchers

Prime Minister Robert Abela announcing the economic recovery plan at Fort St Elmo
Prime Minister Robert Abela announcing the economic recovery plan at Fort St Elmo

Government has unveiled an ambitious €900 million recovery plan that goes from refunding wedding expenses to subsidising electricity bills for commercial entities.

The plan targets economic recovery by encouraging consumer spending, sustaining low income families and providing targeted funds for industry to develop.

Prime Minister Robert Abela has described the plan as a “budget with a vision”, which sheds light on what was supposed to be a dark period.

Abela said the plan wanted to inject courage so that the economy could get going once again. “We avoided a complete lock down, which was important because it kept the economy ticking and now is the time to revive it,” he said.

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The economic recovery plan will cushion the impact of the COVID-19 pandemic and hopes to stimulate domestic demand, cut costs for businesses and propose an ambitious overhall of industrial spaces to be able to attract foreign investment.

Each person aged 16 and over will receive €100 in vouchers to spend at hotels, restaurants, bars and retail shops that were forcefully shut because of the pandemic.

Another measure that cuts across the board is an excise tax deduction on fuel that will see petrol and diesel retailing at 7c per litre cheaper from Monday.

A generous tax cut will also be introduced for people who will be buying or selling residential property by March next year. The reduced rates could see a buyer save up to €14,000 in tax.

Families on low incomes and who currently receive the in-work benefit, will receive a one-off €250 grant and the rates applicable for each child will be revised upwards.

WHAT’S IN IT FOR FAMILIES

  • Fuel price cut: The excise tax on petrol and diesel will be reduced by 7c per litre. The pump price of petrol will be €1.34 per litre and that of diesel €1.21. This will come into effect on Monday, 15 June.
  • €100 retail vouchers: Every person aged 16 and over will receive €100 in vouchers. The vouchers will be in multiples of €20. Four vouchers can be spent in hotels, restaurants and bars, while one voucher can be spent at retail outlets that were forcefully closed during the pandemic. This will cost €34 million and vouchers will remain valid until the end of September.
  • Property tax cut: Property buyers and sellers will benefit from a cut in capital gains tax. Buyers will have their tax cut from 5% to 1.5%, and sellers will see their tax decrease from 8% to 5%. The rates will apply on the capital value up to €400,000. The reduced rates will apply on all residential property contracts signed until the end of March next year. This measure will cost €32 million.
  • First time buyers: The law will be amended to allow first time residential buyers to benefit from the specific rates even if they have a property to their name.
  • Wedding expense refunds: To mitigate the burden incurred by couples who had to postpone their wedding this year because of COVID-19, government will refund up to a maximum of €2,000 on additional expenses incurred.
  • Low income families get money boost: The in-work benefit thresholds will be extended and beneficiaries will also get a higher amount per child. Families receiving the in-work benefit will also receive a one-off grant of €250.
  • Wage supplements for students, elderly: From now until end of September, students and pensioners who work part-time will receive the wage supplement, which was denied from them when it was introduced in March.
  • Tax refunds: The budget measure to refund part of an individual’s income tax will kick in over the coming days. Some 210,000 workers will receive €11.5 million in tax refunds.

But the cherry on the cake is a €400 million investment the government plans to make over the coming years to improve the industrial infrastructure. This investment will go to build new and modern factory and manufacturing spaces as Malta bids to attract foreign investment.

The recovery package will also see companies benefit from various funds and support measures to cushion the impact of COVID-19 and help them bounce back.

The wage supplement introduced in March will be gradually phased out by September with some companies shifting to lower support from July.

Commercial entities that were hit hard by the pandemic will have their electricity bills for July, August and September subsidised. They will also receive a grant to partially cover rental costs.

In a briefing for journalists before the announcement was made, the Office of the Prime Minister’s head of secretariat Clyde Caruana said the package will be financed through government lending.

“Since the start of the year, people and commercial entities have amassed €900 million more in bank deposits. This money is idle in the banks, earning no interest. We want to entice people to invest that money in government bonds, which will go to finance the recovery,” Caruana said.

He noted that in April alone when the partial lockdown was in full force, bank savings increased by €425 million.

“The money is there. We want to move it from the banks and put it to work,” he added.

The recovery is based on three key elements: it helps businesses to keep going at a time of reduced demand; it encourages people to spend money; it creates the infrastructure to attract foreign investment.

The recovery plan comes after the government lifted all COVID-19 restrictions. Businesses have reopened with hygiene and safety measures that limit the spread of the virus.

The airport will reopen on 1 July with flights from 19 destinations. However, the tourism outlook remains bleak with government hoping that internal tourism could help mitigate the impact.

WHAT’S IN IT FOR BUSINESSES

  • Wage supplement tapering off: The measure by which government has been financing €800 per month per employee will be retained until the end of September for businesses in tourist accommodation, travel agencies, language schools, organisers of mass events and air transport. For other companies that were receiving €800 but have now restarted with difficulty, the wage supplement will go down to €600 per month per employee until the end of September. Other companies that have reopened and were receiving €800 will be shifted to Annex B and start receiving €160 per month. The new rates will kick in from 1 July.
  • Electricity subsidy for businesses: The government will subsidise 50% of the electricity cost, up to €1,500, for the months of July, August and September. The measure will cost government €30 million. Applies to commercial entities that were on Annex A and Annex B.
  • Rent subsidy for companies: Government will pay out a grant, up to a maximum of €2,500, to help commercial entities cover rental obligations. This measure will cost €50 million. Applies to commercial entities that were on Annex A and Annex B.
  • Tax deferrals: Company tax deferrals have been extended for June. National Insurance, income tax and maternity contributions will start to be paid from 1 July. Other taxes due by companies have been deferred to the end of August. Companies can pay the deferred tax by May next year, with no interest charged.
  • Commercial licences: All licences paid to the Malta Tourism Authority and the Commerce Department for 2020 will be waived. Those who have paid their licence will get a waiver in the next year. This measure will cost government €5 million.
  • Tax credits to grants: Malta Enterprise’s micro invest scheme will see 30% of credits to businesses transformed into grants. The limit will be €2,000 for Maltese businesses, and €2,500 for Gozitan businesses. This will cost €5 million.
  • Re-modelling business fund: Malta Enterprise will manage a fund of €2.5 million intended for businesses that plan on re-engineering their model to adapt to new circumstances. Each company will be eligible for a maximum €5,000.
  • Higher budget for skills scheme: The Malta Enterprise scheme intended to help companies finance in-house training for employees will have its budget increased by €5 million.
  • Development Bank underwriter: The Malta Development Bank will act as an underwriter for private companies where bond roll-overs are due. This measure is intended to create peace of mind just in case companies find it difficult to roll-over bond issues.
  • Port charges refund: For a period of six months, government will give refund 33% of port charges. The measure will not apply on transhipment activities. Government will also refund 10% of container discharge fees. This also does not apply on transhipment activities.
  • Export promotion: A budget of €400,000 will be allocated to Trade Malta, which it will use to refund 50% of expenses made by companies for digital promotion of their products, up to a maximum of €10,000.
  • Cancelled international fairs refunds: Government will refund up to 80% of expenses incurred by companies that were going to participate in international fairs that got cancelled because of COVID-19.
  • Export credit guarantee: The Malta Development Bank will provide an export credit guarantee up to a maximum of €10 million for companies seeking to export their products in developing markets.
  • Modernising construction industry: The budget measure to help finance the modernisation of construction industry equipment will be beefed up for a total budget of €4 million.
  • Advertising fund: A €5 million fund will be created for Maltese companies wanting to advertise their products locally and overseas.

WHAT’S IN IT FOR OTHER ENTITIES

  • Voluntary organisations fund: To mitigate the loss of income sustained by voluntary organisations, government will create a €3 million fund to help sustain these organisations.
  • Private elderly homes fund: Private elderly homes that sustained higher expenses during the pandemic because of live-in arrangements for carers stand to benefit from a €2 million fund.
  • Media: The special agreement to help finance media houses during the pandemic will be extended until September.

LOOKING TO THE FUTURE

  • €400 million to modernise manufacturing infrastructure: The government will invest 3% of GDP over the coming years to modernise industrial estates and create new spaces to be able to attract foreign investment. This is intended to put Malta in a position to quickly tap any foreign interest in opening a manufacturing base here.
  • Green recovery: Government will work on finalising a plan to implement a low carbon strategy. This will be unveiled in the budget for next year.

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