Deficit to be 2.7% of GDP by end-2013 – Scicluna

Finance Minister Edward Scicluna announced a revised deficit target of 2.7% of gross domestic product by the end of 2013, after announcing that expenditure and revenue targets had to be revised due to the previous administration's stewardship of the public finances.

Scicluna, presenting the budget that was not passed back in December 2012, said the government would be aiming for a deficit-reduction programme over the coming years of 0.6% every year to achieve a balanced budget.

"Previous economic growth targets gave the mistaken impression that government expenditure  could be increased, and still those targets were never reached... the previous government announced it would achieve a balanced budget three times, which never materialised," Scicluna said, announcing the 2012 deficit at 3.3% of GDP, which will put Malta back into the European Commission's excessive deficit programme.

The finance minister said interest payments on national debt had now reached €253 million a year, while the deficit is expected to increase by €68 million, rising to €164 million.

Scicluna also said that the government would be embarking on a campaign to ensure greater fiscal morality, specifically saying that "citizens must understand that taxes have to be paid in the best interest of the country."

According to the latest estimates, the consolidated funds' deficit forecast by the PN administration in November had gone up from €142 million to €342 million. Revenue will suffer a dip of €57 million.

He pointed fingers at collective agreements and informal agreements signed with the nursing, medical and teaching professions after the Budget and before the electoral campaign. "We won't change these agreements. We will honour them," Scicluna said.

Other numbers Scicluna revealed in his 'state of the public finances' speech:

• That the government wants to reduce the deficit by 0.6% every year;
• There was a reduction in revenue due to a drastic fall in income from levies, VAT and other taxes, of some €150 million, including €66 million in levies owed by Enemalta, and €100 million from EU funds;
• In 2012 government revenue fell by €245 million when compared to the approved estimate.

Specifically, Scicluna also announced that measures that are now immediately implemented include: increasing the seven-year period for the 12% final withholding tax on property sales, to 12 years, starting 8 April; changes in excise tax starting from 9 April; amending the tax thresholds for minimum wage earners so that they remain exempt from taxation; and abolishing inheritance tax on properties or donations from parents to children, starting from 1 January 2013.

"Although this budget was not prepared by the Labour government, we must understand that this budget's sole aim is to have a clear picture of the country's state of public finances. A new Labour budget will be announced for November, and work on it has already started.