Budget 2022 | Social partners react to Caruana's Budget speech

Chamber of Commerce – Budget acknowledges present realities 

The Malta Chamber of Commerce, Enterprise and Industry welcomed this year’s Budget. The Chamber’s key proposals were also taken on board, amongst others: schemes to incentivise productive work and shift works as well as reduced tax rates for part-time and overtime work; zero tax on pensionable Income for those in employment beyond retirement age; zero tax on the re-investment of profits for business operators; and green investments in terms of mobility and construction as well as in favour of heritage buildings and UCA properties. 

But Chamber said the budget did not effectively address measures aimed at the recovery of the worst hit sectors such as tourism related segments.   

The Chamber also said the government’s short to medium terms objectives of achieving a deficit rate of 5.6% looks overly optimistic.  

“The Malta Chamber notes that the Government is forecasting the highest increase in revenue to originate from VAT receipts with estimates higher than the 2019 VAT income.  This assumes continued growth in consumption and rigorous enforcement of VAT dues as well as the collection of deferred VAT payments. The Malta Chamber fully supports the Government’s renewed commitment towards fiscal morality.” 

MHRA – Investment in quality of life 

The Malta Hotels and Restaurants Association (MHRA) noted with satisfaction various incentives addressing people, the environment and prosperity as was advocated in the Association’s pre-budget proposals.  

The budget’s focus on sustainable development with special emphasis on fiscal incentives for re-investment in business, and on connectivity and marketing of the tourism product are also commended by MHRA. Indeed, MHRA lauds the increase in the budgets for the Malta Tourism Authority and various government entities which are tasked with the upkeep and cleanliness of public spaces.    

“This budget is evidence of how well Malta was managed during the pandemic not only in safeguarding the health of our people but also in generating enough reserves to sustain business operations during unprecedented economic conditions and significantly to take forward the sustainable development of our economy and improve the quality of life for all our people - the real protagonists of a successful Malta.” 

GWU: ‘Socially bold Budget’ 

The General Workers Union said that over 18 proposals it had submitted to the government had formed part of Budget 2022, which it dubbed socially bold. 

Among these proposals were the double payment on working Sundays for contractor employees; 15% overtime tax for those earning up to €10,000; and 10% on part-time work, with extended opening hours for childhood centres. “These measures will further incentivise work and a higher income for workers.” 

“It is also rewarding to see that the contributory and non-contributory pension will increase, which means an increase to all pensioners. Apart from those who choose to continue working beyond retirement age, their pension will be distinguished from any other income and excluded from any tax payment.” 

The GWU said it was pleased to see the government addressing “the problem of mass transport” and seeing priority given to the environment with free public transport, a measure it claimed would reduce private cars and air pollution. 

“This budget also provides for a skills census next year to identify where there are deficiencies and disproportional skills of workers. The GWU believes that following this census and analysis, the country would be better placed to direct vocational education towards its kills shortage.” 

Chamber of SMEs: ‘More disposable income, but FATF greylisting ignored’ 

The Malta Chamber of SMEs noted a number of positive initiatives that will aim at pushing both businesses and workers forward. Addressing Malta’s human resources crises, the Budget will result in rewards for those choosing to work more through in-work benefits and tax incentives. 

At the same time the Budget acknowledges the support businesses require following the pandemic in making investments. The incentives welcome includes allowing the transferability of capital allowances, tax benefits on reinvested profits, financing schemes and various other schemes that encourage sustainability and moving towards clean energy amongst others. 

Incentives in favour of green transport, electrification of vehicles and sustainability of buildings show also a clear commitment aimed at making Malta a cleaner and more attractive country for locals and tourists alike. 

While the Budget further explained that work to get Malta out of the FATF greylisting status is underway and is expected to yield the desired results, the GRTU said this fell short in addressing how this greylisting is affecting Maltese SMEs. 

ADPD: Minimum wage not address 

Carmel Cacopardo, chairman of ADPD — The Green Party, said in the party’s first comments that a substantial part of the budget was a list of benefits that had been rolled on from predvious years. 

“It is good that the government is going to invest in an afforestation project in the Marsaskala limits of Inwadar, near an area that the government wanted to develop recently as a university. The government was forced by public opinion to change these plans. But on one hand it will encourage afforestation but then it is planning to take the Marsaskala beach to convert it into yacht marina.” 

ADPD said that while the budget offered several benefits, it did not directly address the outstanding problem of a decent minimum wage. “Caritas’s repeated studies show that the minimum wage must be substantially increased to be a decent living wage. During the year the European Union started a consultation on a Directive establishing a uniform way to calculate the minimum wage in the EU. An analysis of this Directive leads to similar conclusions drawn by Caritas in Malta. The minimum wage needs to be substantially raised. The Maltese government is opposed to all this.” 

MEA – Pre-election Budget built on strong assumptions 

The MEA said the Budget had the characteristics of a pre-election budget which commits itself to increased expenditure, strengthening the social safety net whilst softening the tax burden in certain aspects, but which provides less clarity on the revenue side of the equation. 

“It is based on a strategy to generate economic growth through an expansion in domestic demand in the short-term through tweaking of numerous social benefits and benefits to pensioners which will increase the disposable income of vulnerable groups. Whilst this is socially desirable and just, it may not provide guarantees for long-term economic sustainability.” 

The MEA said that although the expenditure on such assistance will be drastically reduced during 2022, it will nonetheless be a major challenge for government to reduce the budget deficit to the targeted levels, given that the fiscal deficit in 2021 is expected to be in excess of 12% of GDP, even if the economy manages to grow at a forecasted rate of 6.5%. 

“This is an ambitious budget that is built on strong assumptions and optimistic forecasts. The impact of inflation, the recovery of tourism to pre-Covid levels, together with how fast Malta can be removed from the FATF grey listing are amongst the variables that will determine the sustainability of our economy and public finances. The grey-listing certainly poses a threat to the financial services and gaming sectors, the two sectors with the highest value added in the economy.” 

Malta Union of Teachers: ‘Educators not consulted’ 

The MUT said the Budget reflected the shortcomings of the government not including teachers in its budget consultation process. “Instead of a budget with vision for the educational sector, it ignores the challenges in our field. As many others would agree, it is mostly notable by what has been omitted rather than what has been said,” the MUT said. 

“The MUT feels that the government is not taking the difficulties in the educational sector seriously and is not paying attention to what educators are saying. The MUT will be looking at the detailed estimates and speeches of the Ministry of Education and hopes that there will be more answers to these problems.” 

The MUT said the budget also omits a plan to overcome a number of challenges in the field: for example, the crisis of teacher shortages, which had consequences on a number of educators who received their deployment only in the last days before school began. “One would have expected that this would be at least recognised as a problem, with a plan for the coming years.” 

Incentives to attract young people to the teaching profession were also omitted. “Measures to give educators the tools with which to work were left out, along with a long-term vision for the educational field that the country needs so much.” 

UĦM – Budget rich with social measures, fails to address reputation 

UĦM’s first reaction to the Budget was that it was rich on social measures, but lacked emphasis on a long-term economic vision and failed to show how government will restore Malta’s reputation.  

“UĦM Voice of the Workers feels that this Budget is focusing on social measures but was expecting a greater commitment in favour of Government’s plan to get off the grey list and ultimately restore Malta’s reputation,” the union said in a statement. 

UĦM welcomed the decision to introduce an employment contracts portal , but noted that this had already been mentioned in the 2016 Budget speech. “This should be a step forward in the fight against precarious employment.” 

Beyond this, the union wants government to implement mandatory union membership for low-income workers.  

The union similarly praised the free public transport measure, again adding that this initiative was floated two years ago.  

Rehabilitation of properties, widening the in-work benefit threshold, and part-time tax reductions were all to the union’s satisfaction. 

However, UĦM was disappointed to see that government will be increasing budget allocation to Steward Health Care from €50 million to €70 million, especially since the increase does not include workers’ wages. 

It added that Budget was weak in terms of government’s vision to attract economic sectors that don’t depend on foreign workers or cheap labour. Additionally, the €1.75 COLA increase does not reflect the sharp rise in essential product prices, according to the union. 

MDA – Budget recognises importance of construction industry  

The Malta Developers Association praised the budget for being a social one, with no new taxes and renewed incentives.  

“In this budget, the government recognised the importance of the development and construction industry by renewing the schemes related to the purchase of property, including first and second-time buyers’ schemes, that were also originally proposed by the MDA in the previous legislature,” the association said.  

Overall, the MDA said that it is a positive and well-distributed budget that will ease the financial lives of many.  

The MDA stressed that incentives must be in place for investors to consider already built, derelict, and vacant properties and help restore them whilst promoting Maltese character and tradition.  

“Therefore, the incentive of tax relief on the sale and purchase of vacant or UCA or traditional style property along with grants for those who do so when buying their first home, has also been very well received.”  

The association praised the tax incentives for people to restore these types of buildings, as well as other incentives for property owners renting at affordable prices and the creation of a church-state affordable housing foundation.  

However, the MDA noted that proposals to incentivise sales and purchases of properties with high environmental standards had no place in this budget, and neither did the gradual shift to carbon neutrality.  

“The MDA feels that these proposals would have helped Malta to meet its environmental targets in a timely manner and therefore urges the government to seriously reconsider whether to adopt them anyway by introducing new measures addressing such, during the year.” 

Gozo Business Chamber - Social services must include Gozo 

The Gozo Business Chamber (GBC) said the Budget maintains a good balance between the social sphere and needs of businesses, all within the strategic direction of sustainability.  

It said that while the budget is positive overall, the specific needs of Gozo as an island region should be given more attention. 

With the Budget adopting a horizontal approach, the GBC said that all the social services delineated in the budget must be offered in Gozo as well, including the services for people with disabilities and the work of the ‘Foundation for Affordable Accomodation’. 

GBC added that the Census of Skills for Workers is an important initiative, but suggested that it should focus on regional levels.  

“One also notes the renovation and investment being undetaken in various industrial estates around Malta. The budget does not delineate any significant investment in the industrial estate in Gozo.” 

On connectivity, the Chamber suggested that government replace the Gozo channel ferries, especially the fourth ferry, into hybrid ferries in the coming years.  

“The electrification of the port in Gozo should also be an important project which would fit within the overall direction of making Gozo carbon neutral prior to Malta.” 

The Chamber praised the property regeneration initiatives, especially the increase in the scrappage scheme for polluting vehicles in Gozo.  

With regards to infrastructure, the Chamber reiterated the need for a new hospital in Gozo to complement the investment in the Queen Mary University of London Campus, and the extension of the port of Mġarr, which has become heavily congested given the new services being offered from this port 

The Chamber added that the Digital Innovation Hub in Xewkija requires a new management model. “The potential of this hub is immense. However, there needs to be a model which attracts start-ups in the digital sector to this hub.”  

Association of Catering Establishments - More action needed for human capital shortage 

The ACE felt that the Budget was a positive one which focuses on key priorities while ensuring environmental, educational and economic sustainability.  

It praised the increases in pensions and students’ stipends, the latter of which they say will inevitably positively impact on the catering sector. However, the ACE felt that more action is required in order to address the catering sector’s human capital shortage while ensuring government reaches its tourism sector targets.  

“The ACE also welcomes the tax incentive for investment through the acceleration of Capital Allowances. However, the ACE would have preferred if entrepreneurs were offered the choice on the allocation of such allowance against current taxes or do a carry back on past taxes.” 

On alternative energy incentives, the ACE suggested that these incentives ought to be customised by industry as opposed to having a one-size-fits-all approach.  

Gozo Tourism Association - Human capital needed to tackle worker shortage

The GTA praised government for addressing social issues in its Budget while also focusing on human capital and the environment.  

“The human capital, including its upskilling and training, is an important asset for tourism, especially during these challenging times when this sector is experiencing shortage of workers,” it said.  

In this sense, the GTA welcomed the various measures announced and believe that they will help retain present workers in the tourism sector while enticing others to a career in the industry.  

It noted measures to upgrade Gozo’s infrastructure, connectivity, and environment. “The Gozo Tourism Association believes that the Island of Gozo can optimise on these two niches and thus start slowly diversify its economy, which presently is heavily dependent and reliant on the tourism sector.”