A dangerous tax plan for our families

The Maltese tax code has always advantaged families. To acknowledge that historically families had one main breadwinner, our tax code has different tax bands for married households. For instance if a couple earns in total €12,700, they pay no tax. If a si

These preferential tax bands embody the fact that while one partner is working, the other is frequently doing unpaid work of great social importance, such as caring for elderly parents. This constrains the earning abilities of this household. While it makes sense to introduce incentives for both partners in a household to work, we should not close our eyes to situations where this cannot happen.

Moreover, while actively removing gender inequalities in the workplace, we have to acknowledge that there is still a large cohort of women who in the past were denied education opportunities and who faced very significant societal obstacles to work. I believe in this historical context, it is socially just to have the married rate tax computation.

More recently the Gonzi administration introduced another set of preferential income tax bands – the parent rate. This innovation recognises the fact that increasingly both partners in a household are in employment. This meant that the married rate computation no longer was that advantageous for new families. In this light the Gonzi administration wanted to introduce a fiscal incentive for couples where both worked, so that they would still be taxed less than single persons. To make it administratively feasible and socially just, this incentive was limited to couples who were parents.

Thus, for instance a parent who earns €10,500 pays no tax. A single person earning the same amount pays €210 tax. Once again this tax advantage makes sense, as parents face considerably higher living costs than single persons. Eurostat statistics, in fact, confirm that in Malta working households with dependent children are three times more likely to be at risk of poverty than working households without children.

The Nationalist party historically has portrayed itself as the party of traditional Maltese values, in particular the family. Thus it was very surprising that Simon Busuttil’s recent tax proposals do away completely with the fiscal advantage that has always been given to married couples and also the better tax terms offered to parents.

In fact, Simon Busuttil is proposing a single tax rate for all earning up to €20,000. Gone are the tax advantages given to couples with a main breadwinner and also to parents in this clean sweep. Under Simon Busuttil’s plan married couples and parents will now be subject to the same tax rate as that for single persons. It is very hard to believe that this was an oversight as the tax proposals are the main plank of Simon Busuttil’s economic proposals. He described them as a radical measure that will increase social justice.

I agree that eliminating the tax advantage for families and parents is radical. I completely disagree that this ill-thought measure will increase social justice. How could it be socially just to remove a fiscal incentive for people who form families and have children? Isn’t forming a family and having children the very basis and foundation of any society? Why is Simon Busuttil, a leader of the Nationalist Party, removing tax advantages for families introduced by his Nationalist predecessors?

Some tax experts I have spoken to have suggested that this idea of having the same tax treatment for all taxpayers, be them single, married or parents, must have been a mistake of Simon Busuttil. After all, many of his proposals are turning out to be flawed and lacking most details.

I am not that convinced. This would be too great a mistake. Everyone who pays taxes knows that there are three different tax computations. It is frequently the first personal detail your employer or your HR department asks you.

While Simon Busuttil wants to eliminate the fiscal advantage to families and parents, Joseph Muscat is very clear that these will remain. In fact, they will even improve. A family on the married tax income bands earning up to €12,700 will get a tax bonus of €340. Under Simon Busuttil’s proposal this family will get nothing. A parent earning up to €10,500 will get €320 as a result of Joseph Muscat’s proposals. The same parent will get nothing under Simon Busuttil’s flawed plan.

Instead of giving tax benefits to low-income couples and parents, Simon Busuttil wants to cut the tax rate for self-employed earning €50,000 from 25% to 10%. This is a total abandonment of traditional Nationalist support for working families, replaced by a frenzied search for votes.

On the 3rd June we should enhance, and not remove, tax advantages for families and parents and ensure they have a better tomorrow.