Malta already has a liberal taxation regime compared to other European countries. Although no one will object to having their taxes reduced, the big talk sounds ridiculous when you consider what’s actually going on behind the rhetoric.
The government is taking a risky bet in social-liberalism by increasing government expenditure, reducing taxation and pushing to collect more taxes whilst hoping to induce even more economic growth.
Note that the government is expecting government revenue to increase by €300 million while also increasing government expenditure by the same amount. Clearly this is not an austerity budget, and in a backdrop of a government mired in corruption, overspending and scandals, the social-liberal experiment is being stretched too far.
Naturally, the government’s debt servicing will increase because debt has increased this year by a grand total of €10.1 billion, but somehow, the government intends to pay slightly less in direct loan repayments next year, bringing them down from €489 million to €459 million.
If Clyde Caruana’s finances go as planned, the government would be paying off its debt on a long-term timeframe, but I’m highly skeptical how these numbers will actually add-up, not to mention that the government is not factoring in external changes that can significantly impact expenditure. The government does not afford to subsidise its way out of another crisis under the same conditions it did during the Covid pandemic.
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