Budget 2021 will depend on COVID-19 containment and Moneyval Assessment – MEA

Miguela Xuereb

The Malta Employer’s Association, MEA has published the document with its proposals for the national budget 2021. In a statement accompanying the document, MEA said that the recommendations were already submitted to the MCESD in August.

MEA’s proposals focus on sustaining employment, stimulating domestic demand, addressing external demand, greening the economy and transparency of incentives.

The following are some of the proposals the Malta Employer’s Association has put forward;

Sustaining Employment

  • The current COVID Wage Supplement Schemes should be extended until the end of September
  • Annex B of these schemes should be removed and leave only the benefits falling under Annex A to which any company affected by the COVID crisis will be eligible, in line with the actual loss in business
  • Companies whose business will be zero will continue to receive the benefits falling under Annex A. for a period of six months
  • In extreme cases, National Insurance contributions will be waived and the period will be accredited to the employees for pension eligibility.
  • Government should launch a scheme to subsidise commercial rents for a period of six months
  • Teleworking Scheme should be extended indefinitely
  • Commercial Energy rates should be reduced
  • Government should introduce re-training schemes and employment support programmes for persons who lost their job
  • Company tax rate to be reduced to 30% for a period of a year, based on 2019 profits

Stimulating domestic demand

  • Government should issue vouchers to be used exclusively in retail and catering outlets
  • VAT rates can be temporarily reduced to lower prices. It is proposed to reduce VAT to 15% and 5% for hospitality
  • A reduction in household utility bills will increase disposable income.
  • Introduce a rental subsidy scheme to households suffering from unemployment or a loss in household income of more than 30% as a result of the crisis

Addressing External demand

  • There should be an intensive marketing campaign to promote Malta and redevelop routes
  • Government could issue direct incentives to inbound tourists
  • Incoming flights could also be subsidised for a limited period

Greening the Economy

  • A national noise reduction strategy is required
  • Stronger incentives to switch to electric vehicles
  • A specific fund should be set up to address climate change, increase innovation and incentivise digitisation

Transparency of Incentives

  • Companies that make use of these incentives need to be held accountable for the incentives received and there needs to be a transparent procedure on the manner in which the incentives are granted.
  • Objective compilation and analysis of where funds have been spent which is communicated to the authorities

MEA stated that the National Budget for 2021 has to be approached within the context of two major events that will have an impact on Malta during the fourth quarter of this year, COVID-19 and the Moneyval Assessment.

The budget will be dependent on the extent to which the country can manage to bring down the number of infections in the coming weeks, and the possibility of a vaccine being developed and distributed internationally, said the association which further explained that if things remain unchanged, government revenues will continue to shrink, and it will be under more pressure to extend its stimulus package to the economy.

This could result in a higher deficit than anticipated and a longer recovery time, placing more strain on government finances said MEA which in reference to the Moneyval Assessment said that any plans for 2021 will depend on the outcome of this assessment.