DEFICIT €79.1m

Malta Independent - - BUDGET 2017 -

Dur­ing the first eight months of 2016, re­cur­rent rev­enue in­creased by €100.2 mil­lion and reached a to­tal of €2,322.6 mil­lion. The share of govern­ment rev­enue from taxes stood at its high­est for the past four years, at 91.2 per cent of to­tal re­cur­rent rev­enue. Rev­enue from taxes in­creased by €200.5 mil­lion and reached €2,119.0 mil­lion.

In­di­rect taxes

Rev­enue from in­di­rect taxes reg­is­tered an in­crease of €74.6 mil­lion and reached €855.7 mil­lion. The in­crease in in­di­rect tax rev­enue re­flected higher rev­enue from Value Added Tax, in line with de­vel­op­ments in pri­vate con­sump­tion and tourism earn­ings, as well as higher pro­ceeds from li­cences, taxes and fines. Higher rev­enue was also reg­is­tered from cus­tom and ex­cise du­ties over the same com­pa­ra­ble pe­riod last year.

VAT rev­enue in­creased by €34.0 mil­lion to €474.6 mil­lion dur­ing the pe­riod. Along­side a more pro­nounced con­sump­tion pat­tern in the Mal­tese econ­omy, these de­vel­op­ments par­tially re­flect higher ex­pen­di­ture by for­eign tourists in Malta dur­ing the pe­riod un­der re­view.

Rev­enue from li­censes, taxes and fines in­creased by €30.2 mil­lion, reach­ing €210.5 mil­lion, re­flect­ing higher pro­ceeds from duty on doc­u­ments while re­ceipts from cus­toms and ex­cise du­ties in­creased by €10.4 mil­lion to €170.6 mil­lion, mainly due to higher rev­enue from ex­cise duty on petroleum and ce­ment, as well as mea­sures in the 2016 Bud­get to par­tially off­set the loss in rev­enue from the phas­ing out of the eco-con­tri­bu­tion sys­tem.

Di­rect taxes

A ro­bust per­for­mance of di­rect tax rev­enue saw an in­crease of €125.9 mil­lion, reach­ing €1,263.3 mil­lion in 2016 from €1,137.4 mil­lion in 2015. The in­crease in di­rect tax rev­enue was due to higher rev­enue from both in­come tax and from so­cial se­cu­rity con­tri­bu­tions, as both rev­enue cat­e­gories in­creased by around 11 per cent when com­pared to the cor­re­spond­ing

pe­riod of the pre­vi­ous year. These in turn re­flected the ro­bust eco­nomic de­vel­op­ments, as well as enhanced ef­fi­ciency in rev­enue collection.

So­cial se­cu­rity

Rev­enue from so­cial se­cu­rity con­tri­bu­tions in­creased by €48.7 mil­lion to €492.1 mil­lion. The pos­i­tive de­vel­op­ments in so­cial se­cu­rity con­tri­bu­tions were sup­ported by the de­vel­op­ments in the do­mes­tic labour mar­ket, con­firm­ing the suc­cess in the so­cial se­cu­rity re­form that aimed to in­crease labour par­tic­i­pa­tion par­tic­u­larly among women.

Non-tax rev­enue

Non-tax rev­enue, which mainly com­prises grants, fees of of­fice and the trans­fer of prof­its gen­er­ated by the Cen­tral Bank of Malta, de­creased by €100.3 mil­lion and reached €203.7 mil­lion. The de­crease was mainly un­der­pinned by a sig­nif­i­cant de­crease in rev­enue from EU grants, re­flect­ing the switch-over to the new Mul­tian­nual Fi­nan­cial Frame­works (MFF), which had a large im­pact on the pat­terns of EU-funded in­vest­ments. When com­pared to the first eight months of 2015, rev­enue from grants de­clined by €100.4 mil­lion.

Mean­while, dur­ing the first eight months of 2016, lower mis­cel­la­neous re­ceipts were off­set by higher fees of of­fice (mainly as a re­sult of pro­ceeds from the In­di­vid­ual In­vestor Pro­gramme), and div­i­dends on in­vest­ments re­ceived from the Iden­tity Malta Agency. Higher re­im­burse­ments and rev­enue from rents were also recorded dur­ing this pe­riod, al­though to a lesser ex­tent. Dur­ing Jan­uary to Au­gust 2016, to­tal govern­ment ex­pen­di­ture, in­clud­ing re­cur­rent and cap­i­tal ex­pen­di­ture, as well as in­ter­est pay­ments on pub­lic debt, in­creased by €38.4 mil­lion to reach €2,401.8 mil­lion. This in­crease was the re­sult of an in­crease in re­cur­rent ex­pen­di­ture which in part was off­set by lower cap­i­tal ex­pen­di­ture. Re­cur­rent ex­pen­di­ture amounted to €2,063.7 mil­lion, an in­crease of €124.4 mil­lion, while cap­i­tal ex­pen­di­ture de­creased by €83.1 mil­lion to €188.3 mil­lion. Lower cap­i­tal ex­pen­di­ture re­flects the trans­fer to the new MFF, which has a large im­pact on the pat­terns of EU-funded in­vest­ments, as also re­flected in lower rev­enue from EU grants. Over the same pe­riod, in­ter­est on pub­lic debt de­creased by €2.9 mil­lion to €149.8 mil­lion.

Pro­grammes and Ini­tia­tives

This cat­e­gory of ex­pen­di­ture in­creased by €44.9 mil­lion to €1,234.1 mil­lion, mainly on ac­count of higher out­lays on so­cial se­cu­rity ben­e­fits, in par­tic­u­lar re­tire­ment pen­sions, and to­wards the State Con­tri­bu­tion in terms of the So­cial Se­cu­rity Act (Cap 318). Higher out­lays were also recorded in re­spect of the up­com­ing Pres­i­dency of the Coun­cil of the EU, as well as the host­ing of in­ter­na­tional con­ven­tions, and trans­port.

Govern­ment en­ti­ties

Con­tri­bu­tions to­wards Govern­ment En­ti­ties reached €239.4 mil­lion dur­ing the pe­riod un­der re­view, rep­re­sent­ing an in­crease of €41.6 mil­lion when com­pared to the same pe­riod a year ear­lier.

De­vel­op­ments in this cat­e­gory mainly re­flected higher out­lays to­wards Job­sPlus and the Univer­sity of Malta, and the sub­ven­tions to­wards the Wa­ter Ser­vices Cor­po­ra­tion and the En­gi­neer­ing Re­sources Co Ltd.

Higher al­lo­ca­tions were also reg­is­tered to­wards the Val­letta Euro­pean Cap­i­tal City of Cul­ture 2018 ini­tia­tive as well as to the Sap­port and Ap­poġġ agen­cies.

Salaries

In the pe­riod un­der re­view, this cat­e­gory of ex­pen­di­ture in­creased by €25.9 mil­lion to €476.1 mil­lion when com­pared to the cor­re­spond­ing pe­riod of the pre­vi­ous year. Higher per­sonal emol­u­ments were mainly recorded in

re­spect of salaries and wages in the health, ed­u­ca­tion, and the el­derly and com­mu­nity care sec­tors.

Dur­ing the first eight months of 2016, Op­er­a­tional and Main­te­nance ex­pen­di­ture which in­cludes pay­ments for util­i­ties, con­trac­tual ser­vices, ma­te­ri­als and sup­plies, trans­port and rent, in­creased by €11.9 mil­lion over the same pe­riod in 2015, to €114.0 mil­lion, mainly due to higher out­lays in re­spect of con­trac­tual ser­vices for health and el­derly care.

So­cial Se­cu­rity ben­e­fits

This area rep­re­sents the ma­jor cat­e­gory within re­cur­rent ex­pen­di­ture and makes up 28.7 per cent of Govern­ment’s to­tal re­cur­rent ex­pen­di­ture.

Dur­ing the first eight months of 2016, so­cial se­cu­rity pay­ments reached €591.4 mil­lion, as con­trib­u­tory ben­e­fits in­creased by €28.1 mil­lion, mainly re­flect­ing in­creases in out­lays to­wards re­tire­ment pen­sions.

Non-con­trib­u­tory ben­e­fits de­creased by €5.7 mil­lion. These ex­pen­di­tures are highly in­flu­enced by de­vel­op­ments in com­pen­sa­tion of em­ploy­ees, in­fla­tion, as well as de­mo­graphic changes apart from a num­ber of struc­tural re­forms un­der­taken with re­spect to pen­sions and so­cial ben­e­fits.

Ex­pen­di­ture by the De­part­ment of So­cial Se­cu­rity re­lat­ing to the state con­tri­bu­tion, which also fea­tures as rev­enue, in­creased by €14.0 mil­lion to €146.9 mil­lion dur­ing the first eight months of 2016.

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