Labour pledge lower tax for business start-ups and part-timers

Labour leader Joseph Muscat made a declaration of intent today that a new Labour government will be making public-private partnerships the favoured model for all government's infrastructural and social projects, in a presentation of his business proposals that included new tax cuts and incentives for start-ups and micro-businesses.

Muscat claimed his proposals today had been costed, but would also generate a net benefit for government coffers by encouraging people to declare their incomes instead of evading taxation on small incomes.

Such measures included raising the 15% taxable income for part-timers from €7,000 to €10,000, which comes at a cost of €5 million; and a lower 15% tax on the first €12,000 in income for micro-businesses run by people who are already in full-time employment, and which also may employ up to two people. "This tax comes at a cost of €1.5 million, but it will incentivize the owners of micro-businesses to employ people and also pay their part-time tax, rather than evading it because it would otherwise get bundled with their total tax declaration."

Muscat said the Labour proposal was based on economic simulations that showed that higher thresholds would encourage such part-timers to declare their tax more willingly.

Muscat also said women aged 35 years or older entering the labour market and who never worked before would earn their first €2,000 tax-free. "It's a specific target for the category of women which European statistics show as being our greatest problem when it comes to lack of participation in the labour market. Currently tax incentives are limited because only those who had children after 2007 can qualify - ours is open-ended.

"The Labour Force Survey says there are over 5,000 women aged over 40 who believe that, given the right incentive, would go out to work - we are telling them that their first €2,000 comes tax-free. And this proposal brings in new revenues because these women will be newcomers to the labour market."

The main tax credit pledged by Labour however was a start-up credit on the first €8,000 earned by newly-set up companies or 10% of their investment or salary bill during their first two years of operation, valid over a period of four years. "We know it is difficult to turn a profit in the first two years, so we want to make this tax credit work by extending it over four years. There will be no impact on current revenue, but a positive impact on potential revenue from new companies."

Other proposals unveiled by Muscat included subsidies on the training of unemployed people for the business that employs them; a Family Business Act that will facilitate the transfer of businesses between family members; and encouraging financial services companies to create venture capital funds and business angel funds for SMEs.