While several incentives and measures were revealed on Monday night through the Budget 2021 announcement, Seed Consultancy’s founding partners, JP Fabri and Nicky Gouder, remarked that it is now of “utmost importance these are rolled out and implemented swiftly and efficiently”.
They commented that resources need to “be redeployed accordingly, to ensure that such measures truly stimulate the economy and see the light of day, as otherwise they will not have their intended effect”.
The co-founding partners’ remarks echo that of the Chamber of Commerce, which praised several measures but lamented a level of vagueness surrounding many more ambitious measures.
Overall, Mr Fabri and Mr Gouder found that this Budget provided “a continuity exercise, with the extension of numerous schemes and incentives”.
(Left) Economist JP Fabri and Tax Specialist Nicky Gouder
It was noted that Monday night’s measures follows the Government’s aim to stabilize economic activity, while the co-founding partners stressed that “the coming months will be critical for the Government to launch the numerous strategies and vision documents it announced”.
“The challenges facing our economy remain and are significant.”
Mr Fabri and Mr Gouder remarked that the Government is recognizing the need for a longer-term vision for the Maltese islands, and, “although not much is said, the Government said that will be delivering on a 10-year vision focused on good governance, a greener economy, and, innovation & digitalization”.
“This is a good and a much-needed start however a broad consultation process is needed to truly future-proof our economy.”
Transforming current industries and attracting new sectors
The pair highlighted the Government’s stated commitment to transforming Malta’s current industries and attracting new sectors.
“Whilst attracting start-ups is positive and there is mention of a venture capital fund, this has been in the offing for quite some time. We believe that a focus on creating the right ecosystems through initiatives such as start-up visas and access to finance would have been welcome and needed.
“In terms of key industries including the digital economy and financial services, the measures are limited. One looks forward to the publication of the National Digital Strategy which should set the roadmap for this sector to further develop.
“In terms of tourism, there was no reduction in VAT as other countries rolled out, but the continuation of schemes already launched including the wage supplement. A new tourism strategy is also in the pipeline and one hopes will provide the sector a renewed impetus post-COVID. Measures supporting the property market were also extended and will support this sector in the months to come.”
Most tax-related measures were extensions of existing ones
Rather than formulating new tax-related measures, Mr Fabri and Mr Gouder commented that extensions of previous measures took place, most of which relate to the tax reductions of immovable property, extended until 31st December 2021.
They noted that the increase in the VAT exempt threshold to €30,000, from €20,000 is a positive introduction.
“Our main proposal before the Budget was the gradual reduction of Malta’s corporate tax rate to 25 per cent over a 5-year period, we believe that this would have incentivised local companies to re-invest their profits, particularly in the coming years. The scheme aimed at supporting innovative projects is however welcome in this regard.”
The Green economy
Mr Fabri and Mr Gouder positively noted a move towards a greener economy through investments towards this sector, “which can generate quality jobs and economic activity”.
On the framework for green bonds, although mentioned in last year’s budget, it was described as “welcome” and “one would hope to attract a growing international sector to our shores and not only remain for local companies aiming to invest in the green economy.”
Social measures
On the social side, “support is being given to the vulnerable cohorts of our society including pensioners”.
Mr Fabri and Mr Gouder remarked that measures launched, and the support given, are aimed at supporting such sectors who have not benefitted from the economic growth registered in the past.
“In terms of education, investment in school and tertiary facilities was announced however key challenges to reduce the early school leaver rate, enhance STEM students and increase the number of students continuing education remain. The focus on health was also around infrastructural development with the upgrading of health facilities and a much welcome psychiatric hospital.”
Infrastructural development
They remarked that it is welcome to see an effort towards the regeneration of abandoned sites through public private partnerships, “which should also stimulate investment”.
A renewed focus on infrastructural development, including road building and plans to significantly invest in industrial infrastructure, as launched earlier this year, was noted.
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