Our notes from the Budget 2022 speech

Finance Minister Clyde Caruana’s Budget 2022 speech, which covered all aspects of the local Maltese economy is no short affair, it was exactly two-and-a-half hours long.

In a nutshell, here are the key points:

  • Free public transport for all as of October 2022
  • Up to €54,000 in VAT refunds for works to restore old houses
  • Increases in pensions
  • 10% increase in student pensions
  • A €20m afforestation project in Inwadar 
  • Reduced income tax rate for part-timers

His introduction praised how Malta has come through the COVId-19 pandemic with flying clours, contrary to the Opposition’s words of doom and gloom, to a degree that the small tri-Island nation has even outdone far larger countries on the European mainland.

The environment will enjoy a major financial boost, according to the Finance Minister.

Pensioners to receive an extra €260 a year: ceiling raised so increases are not taxed

Pensioners are top of the beneficiaries list in his address to Parliament, as the echelon of Maltese society is now expected to enjoy a €5 weekly increase, which is €1-75c COLA increase and a €3.25 weekly increase, just like last year’s handout. Total cost will run into €26m. Supplementary allowances of up to €6.50 weekly are also on the cards, but depending on one’s income.

The pensions for those whose partner has passed away will also be increased by €5 per week. 12,000 pensioners will receive this increase, which comes at a government cost of €3.3 million.

Service pensions will also increase by €200 so that the total now stands at €3,066.  That measure will affect 3,250 service pensioners with a total spend of €2.7 million by the government.

This is part of increases of several government pensions, which summed up would work out to get an extra pension cheque’s equivalent. The Service pensions will be increased by €200, while the cost of living supplements will be paid “gradually” to all retirees beginning in 2008. If one retired but do not qualify for a pension, you will receive an extra €150 check. According to Caruana, around 12,000 people, “mainly women,” will benefit.

This is one major piece of good news, undoubtedly, as pensioners are especially susceptible in society because they must maintain their level of living. This budget will assist retirees in maintaining their standard of living through a variety of incentives and programmes.

Another measure affecting pensioners is an increase of up to €2.50 per week or €130 per year by gradually paying all those who retired after 2008 the cost of living bonus.  43,000 pensioners are expected to enjoy this increase, with the government spending €2.5 million on this measure.

Caruana pledged that the government’s medication formulary will be expanded. Cancer, osteoporosis, fibromyalgia, circulatory problems, inflammatory illnesses, uncommon diseases, IVF patients, and some rare and severe sensitivities will all be included. Senior citizens aged 80 and over who are qualified for a supplemental allowance will be eligible for free medications beginning next year. Donations of up to €20,000, including air space, will not be included for calculating pensions.

Extra €100 for anyone who has a baby or adopts: parents to get sustainable ‘starter-pack’ for newborns

Those having a child or adopting one next year, you will receive an additional €100. A stipend for new parents, which is now worth €300, will be increased to €400.

€10,000 grant for vulnerable children at school: the scheme will cost €1 million and the cost will increase if necessary

School principals will each get €10,000 to spend on food or other basic necessities for students from underprivileged families. This is being done to ensure that vulnerable children do not go without essential supplies or nourishment. It will be left to the principals of the schools to decide how to spend this money.

Children’s disability allowance rises:

€200 increase in grant for parent who quits work to care for disabled child

Over 1,300 disabled children who require occupational therapy will benefit from a number of vouchers that may be utilised for such therapy in the private sector, achieving the goal of early intervention for disabled children. More schools will be equipped with Autism Units and Braille machines, and the help provided to these students will be extended beyond post-secondary education.

The incentives and benefits for the disabled are centred on increases in allowances for disabled children (it will rise to €1560 per year), grants for carers of people with severe disabilities (up by €300 to reach €500), and a grant for a carer at home to rise to €7,000 per year (from €6k), as well as subsidies for the Home-Helper-of-Your-Choice scheme to rise to €7/hr (from €5.50).

Several groups in society who suffered “past injustices” will benefit from monies allocated to rectify what they had suffered, amongst these €11 million former Enemalta workers. 

Part-time employees will now be able to pay social security payments for more than one part-time job, up to 40 hours per week, giving them a greater chance for a good pension.

According to Caruana, severe disability compensation will no longer be subject to means-testing.  More efforts to help the disabled: there are plans to invest in autistic units and Braille machines for schools, as well as programmes for those who require occupational therapy.  Other commitments include a handicapped community centre and a ‘drive from wheelchair’ vehicle that will be used to educate physically challenged individuals to drive.

More social initiatives were announced to assist people trying to make ends meet or to get on the property ladder. Schemes to encourage house ownership (such as an equity sharing plan or the newly announced programme to guarantee individuals have access to home insurance) will be expanded. The Housing Authority will also implement care plans for persons in need of social housing. In addition, the government will provide €300,000 to the church’s Foundation for Affordable Housing.

Rent housing built before 1995 with a value of up to €250,000 that requires structural repairs will now be eligible for subsidies of up to €25,000. There are also tax breaks for private property that is rented out as affordable housing — and any such property transferred to renters is not taxed.

A Community Hub for persons with disabilities will be established in the island’s north, and psychological services for individuals with disabilities and their families will be expanded.

A ‘Drive from Wheelchair’ car will also be acquired so that handicapped people can learn to drive. Driving instructors will receive specialised training so that they may conduct instruction on this vehicle as well.

The INK Project, which is partially funded by the EU, will also continue to provide training and job experience opportunities to persons with disabilities. 

The installation of a new specialised CT Scan equipment at St Vincent de Paul, a state senior home, will result in further investment. This will be linked to a previous project that saw an X-Ray machine placed in the same facility.  At the residence, there will also be a garden designed particularly for persons with dementia.

According to the Finance Minister, about 680 households would be assigned properties under the “Rent to Assist” initiative. The first programme of intergenerational housing, which will house about 80 inhabitants, both young and old, will begin in 2022 in buildings that have been rehabilitated from dilapidation as part of this initiative.

The construction of 500 homes using European Investment Bank money is nearing completion, while work on another 700 units using the passport scheme fund (NSDF) is also underway.

A semi-specific Care Plan to address unique requirements of people in terms of housing and combat reliance on this housing will also be introduced for the first time this year, with the goal of expanding it to all those in social housing.

The Equity Sharing Scheme will be expanded and made available to persons over the age of 30, allowing them to enter the home market with the government guaranteeing up to 50% of the property worth. Together with the Archdiocese, the government will give €300,000 per year to manage a new Foundation for Affordable Accommodation, which will particularly target those persons whose income is over the threshold for social housing but still low enough that entering the property market is difficult. 

The tax rate on property that has been rented at an affordable cost to individuals qualifying for the rent benefit will be cut in half as well.

This budget also includes the New Hope Guarantee plan, which the government unveiled earlier this year.

A significant change for part-time workers: overtime taxation will continue to fall, with workers who do not work in a managerial role and earn less than €20,000 per year being taxed at 15% for overtime up to €10,000. The part-time tax rate will be reduced from 15% to 10%, resulting in a €5 million tax cut for 23,000 workers.

Free daycare will be extended for another year and will be extended to people working nights and shifts. Minister Caruana says the government will hold talks with the MCESD to ensure that the nation can follow EU rules on parental leave and work-life balance next year.

The administration will also debate the minimum wage “in order to find a consensus stance for the country that is favourable for both employees and companies.”

Working pension income will be exempt from taxation in five years. That’s meant to encourage individuals to continue in the workforce – Malta’s population is ageing, and we need all the help we can get.

Workers who work ‘atypical’ hours (nights and weekends) and earn up to €20,000 per year will be eligible for a €150 in-work bonus. Minister Caruana states that this is aimed at hospitality, administrative, manufacturing, and transportation employees.  To be qualified, one must have worked for the company for at least six months.

The government intends to invest in human capital, as evidenced by the newly announced national employment policy. A skills census of all employed people will be conducted in early 2022 – the first of its type in Europe, not only Malta – with a total cost of €2 million. Then, a workplace digitalization audit will take conducted.

Those who work unusual hours (either night shifts or weekend shifts) will get an in-work incentive of €150 provided their base pay does not exceed €20,000. This will apply to a variety of industries, including manufacturing, catering, transportation, and lodging. This is projected to help around 40,000 jobs.

Working parents are entitled to greater in-work benefits, with the qualifying band being considerably expanded. Couples earning up to €50,000 per year will be eligible (up from €35,000). Single parents earning up to €35,000 a year will be eligible. In addition, income in households with one working parent might exceed €35,000 per year.

The Cost-of-Living-Adjustment for this year will be €1.75 per week. Caruana also claims that the government would be working with social partners to create a new mechanism to assist low-income individuals in difficult situations. The government will bear the expense of this increased assistance.

Students’ stipends to increase by 10 per cent and they can work part-time up to 25 hours week while keeping stipend

Student stipends will be increased by 10%, and students will now be permitted to work 25 hours a week without forfeiting their stipends. This will result in a €5 million boost for all students across each of these points.

More money will be invested in apprenticeships for students in the private sector, and new legislation governing the status of educators – including KGEs and LSEs – will go into effect next year. A mentorship programme for newly graduated teachers will also be created in collaboration with the University of Malta, MCAST, and the Education Department. SEC examinations should be designed in such a manner that students may sit for them at the school where they attend, providing them with a more familiar and less stressful setting. 180 laboratories around the country will also be modernised as part of a push to promote STEM education.

The construction of schools in Msida and Rabat, Gozo, will continue, while modernization projects in Qormi, Mellieha, Ghaxaq, and a number of Gozo schools will also take place. The Malta Council for Science and Technologies will establish a new programme dubbed Go to Market with the goal of commercialising the most sophisticated technology for the local and worldwide markets.

Caruana claims that the Covid-19 Wage Supplement may be phased down, but that it would be substituted by new incentives — but specifics are few. “We will see that even in our recovery phase, we do not leave businesses alone,” Caruana adds. “As a result, we will develop a set of fresh incentives.” Rent subsidies for a number of enterprises will also be increased, as will subsidies to help companies and importers deal with rising transportation costs. There will also be tax breaks to encourage businesses to reinvest their revenues in a new Malta Enterprise initiative.

Penalties for unpaid tax amid crackdown on interest amnesties: interest rates on unpaid tax to rise to 7.2% next year

“Everyone is required to pay taxes,” the minister tells the House. The taxman will get harsher on those who owe outstanding VAT or income tax. Interest payments will no longer be waived as a matter of course, and interest will only be waived in accordance with the law, with everyone else subject to a 7.2% interest rate. Anyone passing on a family business to a relative will only pay 1.5% in stamp duty on the transfer, rather than 5%. 

€470m investment in industrial zones: new industrial zones will not take up ODZ

The government will spend €470 million on industrial estates, and road construction will continue. Roadworks will continue, as will rehabilitation of the Munxar and Sannat village squares, as well as the commencement of redevelopment of the Grand Harbour.

Caruana assures the financial services industry that the government is dedicated to safeguarding it against headwinds, and he lists a number of bureaucratic efforts that the government is launching to enhance the sector.

According to Caruana, the government aims to lure start-ups to Malta by providing a ‘start-up visa.’ Malta Enterprise will collaborate with Community Malta to establish the initiative, which will target non-EU entrepreneurs.

As the nation wants to engage in new economic niches, €500,000 will be invested in training institutes for students on emerging technologies. In addition, Malta Enterprise and the University of Malta will collaborate to establish a Seed Fund for academics and entrepreneurs.

A Start-Up Residence Permit will also be available to attract more start-ups and entrepreneurs, allowing more firms to reside and set up shop in Malta. The Malta Development Bank SME Tailored Facility will also be expanded, and a Blue Med Hub will be established with a number of specialists to attract start-ups and small businesses, with a particular focus on collaboration with Africa and the Middle East.

Caruana said that the Xewkija heliport will be renovated.  An organisation dedicated to the rehabilitation of touristic zones has been established, and it will oversee a variety of locations such as St Paul’s Bay, Bugibba, Qawra, and Xemxija as part of a comprehensive strategy for the restoration of Malta’s Northern region. An expert committee will be in charge of determining what research is required before Bugibba is regenerated.

Minister Caruana said the government aims to expand its film sector and will attract more big-budget projects next year. He also stated that the film sector had a record year, with 28 foreign productions generating €91 million for the country and creating more employment. The construction of the country’s first soundstage will begin in 2022, allowing Malta to continue attracting films, as well as the inaugural edition of the Malta Film Awards.

Building contractor licencing requirements, according to Caruana, are on the horizon. Licensing will necessitate a strong hand with rule-breakers since there hasn’t been enough enforcement in this area in recent years. The licence will be a quality certificate, and incentives will be considered for those who adhere to such a standard.

In terms of economic growth, real GDP is expected to increase by 6.5%. Employment is anticipated to grow by 2.2% in 2022, while unemployment will stay low at 4%. Economic growth is anticipated to continue, with real GDP growth of 4.7% in 2023 and 4.5%in 2024, respectively.

Caruana also announced another major measure: from tomorrow, anybody performing work to rehabilitate old or abandoned dwellings, or any property within a UCA, would be exempt from paying VAT on the first €300,000 in works. This equates to a massive €54,000 in VAT savings. The plan will only apply to those who do not split the property, and the aim is that it will inspire more people to repair historic houses rather than simply tearing them down and turning them into a supposedly contemporary apartment building.

Capital gains taxes will also be eliminated on properties erected more than 20 years ago that have been empty for more than 7 years, as well as on properties in UCA and new ones.

Capital gains taxes will also be eliminated on buildings erected more than 20 years ago that have been empty for more than 7 years, as well as on properties in UCA and new ones built in the usual and traditional Maltese style. First-time buyers of these homes will be eligible for a €15,000 subsidy, which will be increased to €30,000 if the property is located in Gozo.

Marsascala promised woodland ‘bigger than Buskett’: afforestation project for the Inwardar national park

A significant afforestation project for Inwadar – between Xghajra and Zonqor (an area larger than Buskett when completed) will be forested over a five-year period with a €20 million investment. 

The notion to afforest Inwadar is not new; in a proposal titled ‘Help Malta Breathe,’ a group of architects identified the 315,000 square metre property. They proposed planting approximately 40,000 trees in this region in their proposal. 

More green spaces will be constructed in Zabbar, Qormi, Hamrun, and Mosta using funds from the passport plan, and the San Anton Gardens will be repaired, while work on more vertical gardens and the long-promised roofing over of the regional road in Santa Venera to be carried forward, as well as the permanent pedestrianisation proposal of St Anne Street in Floriana, will continue to be studied.

The famous Schreiber ground in Pace Grasso will also be transformed into a communal open space, with over 165 trees, 2,500 bushes, and 1,500 decorative plants planted in the 12,000 square metre area. Parks and green areas will be added to towns and villages and more work at Ta’ Qali national park, to all yield more than 60 football pitches worth of open space, 60,000 trees planted and 86,000 square metres of ‘landscaping’.

Caruana has also promised a number of additional environmental initiatives, including ‘intensified’ attempts to repair vulnerable ecosystems such as Comino, the Victoria Lines, and other places. Schemes for solar panels, solar water heaters, and heat pumps will also be expanded, with the promise of the ongoing construction of solar panels on public buildings and for non-governmental organisations. New and more energy-efficient lighting will also be placed throughout Valletta, and the Sustainable Development Awards will be introduced to encourage individuals to be “catalysts” for change in the green economy.

The Minister of Finance also announced that on October 1, 2022, public transportation would be free for all. The timeframe is set in such a way that the public transportation operator has time to adjust to the policy, and it is a measure that will make Malta one of only two nations with free public transportation. Commuters will save around €300 per year as a result of this approach. Public transportation was initially made free for 16-year-olds and full-time students, a policy that was then extended to individuals aged 75 and up beginning in 2020, and then to those over 70 beginning in 2021.

Grants to purchase electric vehicles increased to €12,000: 1,200 new charging points in next three years

There are growing advantages for low-polluting vehicles, particularly plug-in hybrids and electric vehicles. It will climb by €3,000 for plug-in hybrids. The incentive for electric vehicles will be €11,000, up to €12,000 if you discard an old car in the process. These hikes will take effect tomorrow. Scrapping grants will be increased to €2,000. Existing plans for scooters, pedelecs, and other modes of transportation, as well as VAT refunds for bicycles and electric bikes, will be maintained.

The government’s waste management plans will be centred on the recently announced ECO-HIVE in Maghtab. A ‘repair centre’ will also be established, allowing individuals to take broken things to be repaired rather than discarded. The administration is also aware of the country’s ever-increasing electrical demand, which will be worsened by the completion of the Grand Harbour shore-to-ship project. 

As a result, research on the second interconnector connection from Sicily will intensify during 2022, and a new mechanism for calculating power bills via ARMS will be unveiled the following year. Investment in Enemalta’s distribution network will also be made, which is badly needed after this summer’s frequent power outages. Meanwhile, Hondoq ir-Rummien, Gozo’s first reverse osmosis plant, is slated to open next year.

As part of the Farm to Fork plan, a new carbon farming programme will be introduced, in which farmers may utilise a grant of up to €8,000 to convert fields that aren’t being used or are out of production to be used for agro-foresting based on fruit trees. Caruana says that a New Water initiative to supply recycled sewage water to farmers for irrigation would be expanded and that a reverse osmosis facility being built in Gozo’s Ħondoq will be operational next year.

ARMS revision announced: billing revision will allow for unused ‘cheap’ units to be saved for later

Caruana claimed that the government wants to overhaul the way the utility billing firm charges individuals for their water and energy use at the much-maligned ARMS.

A new blood bank and a facility for stem cell processing and storage will be built. Caruana further claims that the government would hire “extra space” to offer Mater Dei Hospital patients the necessary acute and elective treatments. Work on a new outpatients block at the hospital will continue, as will investment in specialised medical areas. In a step forward from a pilot study, continuous blood glucose monitoring for diabetes type 1 patients will be extended to all such patients aged 17 to 21.

Work at the Marsa Sports Complex will continue, as will construction of an Olympic-sized pool in Cospiqua, as well as work on waterpolo pitches in Marsascala, Valletta, and Marsaxlokk. A new football pitch will also be installed in Msida St. Joseph. Caruana is referring to two initiatives announced in last year’s budget: an indoor rowing tank and an outdoor velodrome at Ta’ Qali, as well as the previously planned €20 million motorsport circuit. Marsa will also get a new gymnastics facility.

New 7.5% income tax rate for artists:guarantee scheme for productions

Tax breaks are also being offered to individuals who work in the arts. Their income tax will be reduced to 7.5% beginning in 2022, and a total of €5 million is being set up for the arts industry across three programmes, including handling Covid-19 event limitations and basic help from the Malta Arts Council. There will also be further investment in PBS, including a new television stage and the development of Malex House with expanded production facilities to welcome a new newsroom and new news studios.

Corradino prison to get rehabilitation centre and community policing to be extended and prosecutions revamped

Government will continue to restructure the Attorney General’s office so that the AG prosecutes more and the police focus on the investigation. Community policing will also be expanded, with Żabbar, Xgħajra, Marsascala, San Ġwann, Żebbuġ, Gżira, Msida, Pietà, Mosta, Mġarr, Żurrieq, Safi and  Kirkop next on the list.

Work on a new prison wing at the Corradino Correctional Facility, which will house 140 convicts, will begin next year, as will vehicle upgrades in the Armed Forces of Malta and the Civil Protection Department.

LESA has also provided over €3 million in funding to local governments for projects around the nation. Caruana also mentions illegal immigration, stating that the increase in the number of immigrants entering the nation is owing to a deal made with Libya and that a Returns Unit set up expressly to handle deportations would be strengthened. Malta will also establish a diplomatic representation in Brazil and Ethiopia for the first time. Concerning animal rights, the idea of establishing a modern rehoming centre for the adoption of animals – including strays – will be investigated.

Malta expects to halve the deficit next year as economy picks up: 2022 deficit projected at 5.6%

This year, the national deficit will be 11.1%, while the national debt will be 61.3%. Caruana, on the other hand, believes that things will improve in the next years. He expects the deficit to fall to 2.9% by 2024. The debt-to-GDP ratio will have increased to 62.4% by that year.  However, there is a caveat to the optimism: Caruana believes that rising energy prices and the threat of rising inflation will result in a 7% deficit next year (instead of the 5.6% forecast).