No sign of removing cereals, energy subsidies as pre-budget dialogue launched

Cereals and energy subsidies will not be going anywhere, with government forecasts indicating Malta will reach its deficit and debt goals with these aid schemes in place, Finance Minister Clyde Caruana said on Wednesday.

Caruana was speaking at the launch of the pre-Budget 2025 consultation process at the Xara Lodge in Rabat.

“I’ve always said we’re running a marathon, not a 100-metre sprint,” Caruana said. “The country can sustain this level of spending. I emphasise this because it is one of the most important characteristics as to why we are in the position we’re in today.”

According to the government figures presented, public spending on food and energy subsidies as a percentage of GDP will stand at 0.7% in 2025, down from 1.4% in 2023.

Meanwhile, the government deficit is expected to fall to 3.5% next year, while debt levels will remain below 50% of GDP until 2028.

Due to the government’s deficit levels, Malta is currently undergoing the Excessive Deficit Procedure at EU level. This has seen Malta adopt a four-year strategy to decrease the deficit by 0.5 percentage points every year.

According to Caruana, Malta will be submitting its medium-term fiscal plan to the European Commission this week, and will be insisting on keeping the food and energy subsidies in place.

Caruana said that, so long as Malta reaches its deficit targets, the European Commission cannot tell it to remove any subsidies.

“My aims as a minister are to control the deficit and the debt. Since we are reaching these targets, this government can fulfil its mandate,” he said.

Caruana also said that while the government is still maintaining an expansionary fiscal policy, this is “slowly being contracted with no shocks to the economy”.

Over 40% of companies not paying due VAT

Caruana spoke highly of the Malta Tax and Customs Administration (MTCA), government's tax collecting agency, during the pre-Budget launch. He said increased investment within the agency has allowed the government to collect €500 million more in tax revenues over the past year.

Caruana added that the MTCA is making increased efforts to ensure that taxes are being collected on time, and that pending payments are decreasing drastically.

The minister mentioned an AI investment that took place within the agency to monitor VAT payments. “This system has been finalised, tested, and corroborated for false positives. It has resulted that 40-45% of entities are not paying the correct amount of VAT.”