Malta Budget 2008
Before I begin my post, there are two things I'd like to address.
First of all - the reason I've been gone so long. I know I never promised frequent posts, but when I did try to post (for the Eurovision for example) I was blocked from logging in for some reason. Now it works. Anyway, since that time I've gone on a ver enjoyable cruise and took a day trip to Sicily :).
Secondly, just after I typed in the title of this post, I found out about Joey Bishop's passing :(. This is a sad moment for me as he was one of the last remaining links to a world I love but don't belong to. So, RIP you 'son of a gun' - as he would say.
Now, on to my analysis of Budget 2008. Before me is the PriceWaterHouseCoopers summary of this year's budget which I will use as my guideline.
First and foremost is the budget deficit. Expected to reach 37.2 million by the end of this year - decreasing by 7 million next year and down to just 3.8 million in 2009. By 2010, the government aims to have a positive figure of 25.5 million. Looking at these figures, one immediately thinks - Wow...
At least, that was my impression. However, this is an optimistic pursuit to say the least. I'm not saying it can't be done. Generally, if Dr. Gonzi says it can - his past has proven to me that it can (That being said, the past is no guarantee of the future). Nonetheless, while many Labourites have often said that Gonzi is too optimistic I generally disagree. This time, however, it is clear that he is being somewhat optimistic. One must question - did he make this prediction because he knows he has a good chance of losing the next election? In that case, it could easily be used as propoganda against the new government for failing to reach aims that were projected when the Nationalists were in government.
Moving on, one sees favourable figures with regards to inflation, GDP, balance of payments, employment, tourism and the manufacturing industry. Seeing these figures directly after reading the deficit projection makes one realise that perhaps, Gonzi's aims are not as optimistic as they may seem and are actually reachable. This is purely a case of time will tell.
The Cost of Living Allowance (COLA) this year is Lm 1.50. Lm1 of which is being made in advance of the coming year. For the first time, this adjustment is being awarded in full to pensioners whereas before, the only benefitted from a 2/3 increase in pensions. Naturally, this is hard to criticise. Who wouldn't want an extra Lm 1.50 in their wallets each week? Even more so for the pensioners. Despite cries over the past few years that we will not be able to support pensions in the near future - they are now being awarded the full COLA. Fair enough, after all - they pay the same prices everybody else does for goods and services - why shouldn't they benefit from equal COLA adjustments? Notably, students do not benefit from any increase. While, as a student, I would have liked to benefit from and extra Lm1.50 (assuming that every month has four weeks that is an extra Lm6.00 a month), one understands that the parents of students are already getting the Lm1.50 (Lm3 in the case of both parents working and together). Not forgetting, that those students who qualify for, what I am calling, the 'Hardship' benefit (luckily - I do not qualify for this) get a greater stipend than other students.
The revision of tax bands. A measure that, up till just before the budget was announced, was promised not to be there. Naturally, this was done to create a positive surprise. I have to admit - it worked. All tax brackets have been expanded for both joint and single computations meaning that the first Lm4,894/3,497 (Joint/Single) are not taxed and that the minimum value for being charged 35% (from that amount on) has been raised to LM12,021/8,157 (Joint/Single) with the joint rate in this case rising by approximately Lm2,000.
Tax deductions for sports and cultural activities are well thought out measures, in my opinion which will help to boost interest in partaking in such activities knowing that costs will be reduced. Furthermore deductions for residential services to the elderly - clearly a proactive approach to the fact that, not only are we living in an aging country, but an aging continent - which our EU membership has made it our issue too (and vice versa). Deductions for Kindergarten school fees - many parents of young children (who wish to send their children to private schools) will find relief in this measure. Back in 1994, when I attended Kindergarten 2 (ie. Second year), such a deduction was non-existant and remained so until 2002/2003 - at which point I was attending Senior school (Form 2/Form 3) (one should note that the deductions introduced at that time affected all private schools from Kindergarten to Senior. The deductions which have been extended in this budget refer only to Kindergarten schools). While I personally, never understood the point of the deduction system - I appreciate it and were I to be in government would not work at getting it removed. Although, I would not hesitate to lessen it in time's of economic need. Nevertheless, it is a measure which all parents will welcome. Especially since within three years, a new generation will be giving birth to children (and sending them to school).
This measure clearly creates an incentive to send children to private school. The reason is simple, despite our aging population there are still many youngsters to cater for which the government struggles to handle in state schools. Thus, by relying on the private sector - a weight is evidently lifted. This is also seen in the case of University...but that's another rant for another time.
Stamp Duty also underwent adjustments in this year's budget. This includes inheritance of property by spouses or children. What interested me more, however, was the stamp duty reduction for first time buyers (as I hope to be one pretty soon). The new rate is that of 3.5% on the first Lm50,000, rather than Lm30,000 (previous situation).
Pension-wise another scheme was introduced by which those people who are of retirement age (currently 61 - reason this has not been raised yet is undoubtedly the upcoming election) and continue to work do not lose any part of their pension. On a similar note, service pensioners will benefit from Lm200 not being calculated when it comes to finding out whether a pensioner qualifies for the additional social security pension. Many soon to retire servicemen and women will welcome this after their years of service to the Maltese Islands.
A few other measures I will mention quickly : paying of one year's social security to people over 45 who are unemployed and seek out a self-employment license, incentives for companies to employ people with disabilities, new unemployment register for people seeking part-time work (a healthy measure which means parents who need to stay with children do not have to worry about being refused unemployment benefit if they refuse a full time job), increase in children's allowance and stipends given to students studying abroad (as mandated by EU law).
This overview leaves out certain measures such as the new Police Academy and the improvements to the Armed Forces of Malta.
An interesting thing to note is that the government did not remove the Airport tax as it was instructed to do before last year's budget (which it responded to by halving it) and this year's budget (no action taken). Undoubtedly, the European Commission will have something to say about this and there is a good chance that the money Maltese people have paid in Airport tax will be refunded.
The Labour party is right in saying that this is an election budget. There is no doubt about it. It is the budget before an election, even if the measures proposed weren't favourable - it would still be an 'election' budget. This being said - my reply is 'so what'? I believe that even if it is an election budget, we should make the most of the measures while we can. The fact is that if the Nationalists are re-elected and they keep this measures, it's a sign of good planning. If they remove them by this time next year - then it's unlikely they will get re-elected for quite a while. Either way, at this point we have this very good, centrist budget and I suggest we enjoy it.
One thing that does concern me however, is that despite all the new expenditure, we see no measures to boost income. Clearly, the government is relying on economic success, investment and growth. Will this gamble prove worthwhile? Only time will tell.
The last bit may seem a bit rushed as it is late here and I am tired...honestly, when I was planning it out - it seemed much better.
Anyway...I'll arrange it tomorrow if I feel the need to...
Till that time, this is still Darryl, from Malta - Online.
First of all - the reason I've been gone so long. I know I never promised frequent posts, but when I did try to post (for the Eurovision for example) I was blocked from logging in for some reason. Now it works. Anyway, since that time I've gone on a ver enjoyable cruise and took a day trip to Sicily :).
Secondly, just after I typed in the title of this post, I found out about Joey Bishop's passing :(. This is a sad moment for me as he was one of the last remaining links to a world I love but don't belong to. So, RIP you 'son of a gun' - as he would say.
Now, on to my analysis of Budget 2008. Before me is the PriceWaterHouseCoopers summary of this year's budget which I will use as my guideline.
First and foremost is the budget deficit. Expected to reach 37.2 million by the end of this year - decreasing by 7 million next year and down to just 3.8 million in 2009. By 2010, the government aims to have a positive figure of 25.5 million. Looking at these figures, one immediately thinks - Wow...
At least, that was my impression. However, this is an optimistic pursuit to say the least. I'm not saying it can't be done. Generally, if Dr. Gonzi says it can - his past has proven to me that it can (That being said, the past is no guarantee of the future). Nonetheless, while many Labourites have often said that Gonzi is too optimistic I generally disagree. This time, however, it is clear that he is being somewhat optimistic. One must question - did he make this prediction because he knows he has a good chance of losing the next election? In that case, it could easily be used as propoganda against the new government for failing to reach aims that were projected when the Nationalists were in government.
Moving on, one sees favourable figures with regards to inflation, GDP, balance of payments, employment, tourism and the manufacturing industry. Seeing these figures directly after reading the deficit projection makes one realise that perhaps, Gonzi's aims are not as optimistic as they may seem and are actually reachable. This is purely a case of time will tell.
The Cost of Living Allowance (COLA) this year is Lm 1.50. Lm1 of which is being made in advance of the coming year. For the first time, this adjustment is being awarded in full to pensioners whereas before, the only benefitted from a 2/3 increase in pensions. Naturally, this is hard to criticise. Who wouldn't want an extra Lm 1.50 in their wallets each week? Even more so for the pensioners. Despite cries over the past few years that we will not be able to support pensions in the near future - they are now being awarded the full COLA. Fair enough, after all - they pay the same prices everybody else does for goods and services - why shouldn't they benefit from equal COLA adjustments? Notably, students do not benefit from any increase. While, as a student, I would have liked to benefit from and extra Lm1.50 (assuming that every month has four weeks that is an extra Lm6.00 a month), one understands that the parents of students are already getting the Lm1.50 (Lm3 in the case of both parents working and together). Not forgetting, that those students who qualify for, what I am calling, the 'Hardship' benefit (luckily - I do not qualify for this) get a greater stipend than other students.
The revision of tax bands. A measure that, up till just before the budget was announced, was promised not to be there. Naturally, this was done to create a positive surprise. I have to admit - it worked. All tax brackets have been expanded for both joint and single computations meaning that the first Lm4,894/3,497 (Joint/Single) are not taxed and that the minimum value for being charged 35% (from that amount on) has been raised to LM12,021/8,157 (Joint/Single) with the joint rate in this case rising by approximately Lm2,000.
Tax deductions for sports and cultural activities are well thought out measures, in my opinion which will help to boost interest in partaking in such activities knowing that costs will be reduced. Furthermore deductions for residential services to the elderly - clearly a proactive approach to the fact that, not only are we living in an aging country, but an aging continent - which our EU membership has made it our issue too (and vice versa). Deductions for Kindergarten school fees - many parents of young children (who wish to send their children to private schools) will find relief in this measure. Back in 1994, when I attended Kindergarten 2 (ie. Second year), such a deduction was non-existant and remained so until 2002/2003 - at which point I was attending Senior school (Form 2/Form 3) (one should note that the deductions introduced at that time affected all private schools from Kindergarten to Senior. The deductions which have been extended in this budget refer only to Kindergarten schools). While I personally, never understood the point of the deduction system - I appreciate it and were I to be in government would not work at getting it removed. Although, I would not hesitate to lessen it in time's of economic need. Nevertheless, it is a measure which all parents will welcome. Especially since within three years, a new generation will be giving birth to children (and sending them to school).
This measure clearly creates an incentive to send children to private school. The reason is simple, despite our aging population there are still many youngsters to cater for which the government struggles to handle in state schools. Thus, by relying on the private sector - a weight is evidently lifted. This is also seen in the case of University...but that's another rant for another time.
Stamp Duty also underwent adjustments in this year's budget. This includes inheritance of property by spouses or children. What interested me more, however, was the stamp duty reduction for first time buyers (as I hope to be one pretty soon). The new rate is that of 3.5% on the first Lm50,000, rather than Lm30,000 (previous situation).
Pension-wise another scheme was introduced by which those people who are of retirement age (currently 61 - reason this has not been raised yet is undoubtedly the upcoming election) and continue to work do not lose any part of their pension. On a similar note, service pensioners will benefit from Lm200 not being calculated when it comes to finding out whether a pensioner qualifies for the additional social security pension. Many soon to retire servicemen and women will welcome this after their years of service to the Maltese Islands.
A few other measures I will mention quickly : paying of one year's social security to people over 45 who are unemployed and seek out a self-employment license, incentives for companies to employ people with disabilities, new unemployment register for people seeking part-time work (a healthy measure which means parents who need to stay with children do not have to worry about being refused unemployment benefit if they refuse a full time job), increase in children's allowance and stipends given to students studying abroad (as mandated by EU law).
This overview leaves out certain measures such as the new Police Academy and the improvements to the Armed Forces of Malta.
An interesting thing to note is that the government did not remove the Airport tax as it was instructed to do before last year's budget (which it responded to by halving it) and this year's budget (no action taken). Undoubtedly, the European Commission will have something to say about this and there is a good chance that the money Maltese people have paid in Airport tax will be refunded.
The Labour party is right in saying that this is an election budget. There is no doubt about it. It is the budget before an election, even if the measures proposed weren't favourable - it would still be an 'election' budget. This being said - my reply is 'so what'? I believe that even if it is an election budget, we should make the most of the measures while we can. The fact is that if the Nationalists are re-elected and they keep this measures, it's a sign of good planning. If they remove them by this time next year - then it's unlikely they will get re-elected for quite a while. Either way, at this point we have this very good, centrist budget and I suggest we enjoy it.
One thing that does concern me however, is that despite all the new expenditure, we see no measures to boost income. Clearly, the government is relying on economic success, investment and growth. Will this gamble prove worthwhile? Only time will tell.
The last bit may seem a bit rushed as it is late here and I am tired...honestly, when I was planning it out - it seemed much better.
Anyway...I'll arrange it tomorrow if I feel the need to...
Till that time, this is still Darryl, from Malta - Online.
Labels: Budget Malta
posted by Darryl | 9:50 PM
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