Budget 2017: the good and the not so good

Budget 2017: the good and the not so good

Was this a good or a poor Budget – and why? Will it help Malta to retain its competitiveness?

Anthony Pace

Partner, Head of Tax

KPMG in Malta


Was this a good or a poor Budget – and why?

This Budget needs to be viewed in the context of the US economic recovery, low global oil prices, developments in the EU, Brexit uncertainty and sharp devaluation of sterling, and past trends in the Maltese economy. Malta’s economic policy in recent years has focused on growth, with this Budget emphasising themes of social justice and investment. In the context of European growth rates, Malta’s economic growth in the first six months of 2016 is a very welcome result. So too is the reduction in the public deficit and the strong net new job creation, largely in the private sector. We also welcome the package of measures aimed at raising the quality of product Malta. Perhaps one question is whether the Budget, in balancing an investment objective with a deficit reduction strategy, is going far enough to drive strong measures to address our immediate problems like infrastructure and connectivity?

Will it help Malta to retain its competitiveness?

The setting up of the Malta Development Bank is a welcome addition to the economic infrastructure of the country, as is the setting up of the Malta Export Credit Agency and of an international accelerator for start-ups, the commencement of activity by the National Economic and Social Development Fund, and measures to reduce the bureaucratic burden faced by entrepreneurs. When implemented, they will collectively support our competitiveness. Of concern, however, is the immediate aftermath of Brexit, and how the devaluation of sterling will affect our trade in goods and services with the UK. Equally important will be the short-term decisions and initiatives to be taken over the coming year with regard to the cost of energy and fuel. Thirdly, the thinness and saturation of our labour market are potentially points of tension in our international competitiveness, and resolving resourcing shortages through the attraction of talent and man power, and their attendant infrastructure requirements.

Will it improve our ability to attract FDI?

The minister’s expression of support for the financial services sector and the integrity of Malta’s tax system, as well as government’s commitment to the dynamic, innovative development of the legislative framework to ensure Malta remains competitive, yet compliant within the rapidly evolving international landscape, are important signals to strengthen our defence of incoming FDI momentum. Strong economic dynamics, a multinational and multicultural talent pool, and an exciting vision of Malta on the fast lane to further development, with the implied opportunities that this entails, should be a key driver for additional FDI.

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