What will Constitute a Strong Budget Programme?
All eyes are on this year’s Budget programme as Malta seeks an exit from the repercussions caused by the COVID-19 pandemic. It is very safe to say that this year’s Budget is of a completely different breed and with the pandemic continuing to spread, it is only natural to expect that the costs incurred by government will continue to increase.
We can only expect that 2021 will also be a very delicate year which will need to be carefully managed to help businesses navigate through the course of this unprecedented period. Think of COVID-19 as a tax which will continue to plague balance sheets for the foreseeable future. This naturally poses liquidity issues going forward.
Whilst we cannot expect government to issue carte blanche cheques, the Budget programme needs to be a very carefully constructed project which helps businesses in the short-term.
What can government do to alleviate the burden of COVID-19?
Short-term reduction of tax
One way to help both businesses and consumers is to provide short-term tax breaks and reductions. A tangible way to do this would be to reduce the corporate tax rate from thirty-five percent. A short-term reduction of five to ten percent can go a long way in giving businesses some much needed breathing space. This would also reward Maltese businesses who have invested over the years and created jobs for several employees.
From an individual consumer point of view, this was already implemented for those buying and selling property, with temporary beneficial tax rates which spurred sales across the past few months. Extending this tax break or introducing new relief measures for income tax may indeed provide some flexibility for many families.
Investment in good governance
There might not be a better time than this to allocate investment towards good governance. The country has long been under a bad spotlight associated with corruption, which consistently poses a growing threat to the country’s reputation. In order to recover quickly after this pandemic runs its course, the reputation of the country needs to be preserved and improved. One must also add that during such turbulent times, citizens will be less tolerant towards corruption and controversial news.
Financial rewards and incentives
The government vouchers were a hit. People enjoyed dining out thanks to a voucher which was sent to their homes, providing each member with a hundred Euro’s worth to breathe some life in the hospitality and retail sectors. With Christmas coming up, perhaps another scheme of vouchers is on the cards.
In anticipation of the upcoming Budget programme, a discussion involving the different parties of the economy is key. Malta has proven time and again that it is capable of survival in the face of adversity.