Pricewaterhouse Coopers issues report on Budget 2000
by Franco Aloisio
The main thrust of the Budget for 2000 is the need to control government expenditure and to promote economic activity, consultancy firm Pricewaterhouse Coopers has said in its report on the budget presented on Monday.
The firm said the results for 1999 were in line with the objectives of the plan launched in last year's Budget aimed at eliminating the structural deficit over a period of five years. By the end of next year, the deficit is expected to go down from Lm135m to Lm109m.
The measures announced in the Budget 2000 include:
Amendments to the Industrial Development Act to introduce new investment incentives, including incentives for the tourism industry.
The launching of the privatisation process.
Further liberalisation of exchange controls.
Controls over Social Security benefits and expenditure in the Health and Education sectors.
Increase in direct taxation through a revision of income tax bands. The tax rates apply for married individuals. No announcement has been made with respect to single individuals' tax bands.
Stamp duty reduction on property transfers and increase in duty on share transfers in property companies.
A VAT charge on petrol, diesel and telephone.
An increase in excise duty on cigarettes and tobacco.
Pricewaterhouse Coopers said that although telephone customers will be subject to a five per cent VAT charge, Maltacom will have to absorb the remaining 10 per cent VAT.
With regards to other fiscal measures, it was announced on Monday that the rules applicable for part-time employees have been brought in line with those regulating part-time self-employment in that only the first Lm3,000 of earnings benefit from final withholding tax of 15 per cent.
Stamp duty on transfers and inheritances of immovable property, whether by locals or foreigners will all be reduced by five per cent with immediate effect. The duty applicable upon transfer of shares remains at two per cent.
However, duty on share transfers in property companies will be raised from two per cent to five per cent. No duty will be levied on the allotment of company shares as from 1 January. A 10 per cent duty on health insurance premiums will no longer be charged.
With regards to social measures, the Budget includes a weekly COLA of Lm1, together with a once only Lm10 per person. Employee social security contributions will be raised by one per cent as from 1 January. A flat rate of 15 per cent of basic earnings will apply for the self-employed.
The budget, the consultancy firm said, gave a lot of emphasis on the Central Bank's independence and on its role in implementing Malta's monetary policy.
Commenting on the Budget's monetary measures, Pricewaterhouse Coopers said the government plans to practically remove all exchange controls by the year 2002. Among the measures which will come into effect on 1 January 2000 are:
Travel allowances will be increased from Lm2,500 to Lm5,000.
Payments of insurance premiums that are classified by the IMF as current payments will be liberalised.
More functions will be delegated to commercial banks and the MFSC.
Direct investment in foreign enterprises will be completely liberalised.
Allowance of up to Lm50,000 on the purchase of property abroad.
The amount which may be invested by Maltese residents in foreign currencies is being raised from Lm8,000 to Lm15,000.
Maltese citizens may hold current local bank accounts of up to Lm2,500 in foreign currency.
Companies providing services for export, such as hotels, will have the facility to hold foreign currency amounts in the same way as the industrial sector.
Retailers may hold savings and time deposits in foreign currency up to a limit of Lm2,500.
Insurance companies may invest their portfolio as they deem fit, subject only to the criteria of prudence laid down by the MFSC.
Another measure that will be introduced, points out Pricewaterhouse Coopers, is that no new bearer accounts will be allowed. Plans are also in hand to regulate and promote financial leasing, while new regulations have been approved for the listing of alternative companies on the Stock Exchange.
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