Finance Minister Clyde Caruana presented the Budget for 2026 in Parliament on Monday, and while the government will not be upping any existing taxes or adding new ones, it is still estimating that it will collect €480 million more in taxes when compared to this year.

Caruana has long been vocal about clamping down on those individuals and businesses which are not paying their taxes, and in summer said that tax authorities would be cracking down on tax dodgers “like a ton of bricks.”

The government is estimating that by the end of the year it will have collected €7.344 billion in taxes for 2025 – which is up from the €7.182 billion collected throughout 2024. 

The estimate for 2026, however, is even higher, as the government estimates that it will collect €7.814 billion in taxes – both direct and indirect.

The main powering factors behind this is an increase in the amount of income tax collected, an increase in the amount of Value Added Tax (VAT) collected, and an increase in social security contributions.

The government is expecting to have collected €3.266 billion in income tax during 2025 – which is actually less than the €3.416 billion collected throughout 2024. 

For 2026, the government is aiming to return to and exceed the amount of income tax collected to 2024, by estimating that it will collect €3.482 billion – an increase of €216 million.

The estimate the amount of income tax to be collected during 2025 was actually under-estimated: the government had estimated that it would manage to collect €2.848 billion but in actual fact will have managed to collect €418 million more by the end of the year.

As for VAT meanwhile, the government is looking to collect €1.695 billion – an increase of €120 million when compared to the €1.575 billion that it is set to have collected by the end of the year for 2025.

Elsewhere, the government is estimating that it will collect €1.838 billion in social security contributions during 2026 – up by €118 million from the estimated total to be collected in 2025, which in turn was some €154 million more than what was collected in 2024.

The government estimated that it will collect €326 million in customs and excise duties – €2.2 million more than in 2025 – and estimated that it will collect €473 million in “licences, taxes and fines” – up by close to €14 million compared to this year.

Tax collection has long been a bone of contention for Clyde Caruana.

This week he told Parliament’s Public Accounts Committee that some 70% of active companies in Malta do not declare any profit and therefore do not pay a single cent in taxes – despite the government ongoing efforts to improve tax collection, which now also includes an AI-powered system.

“At some point we need to start analysing companies’ profits. What is eating away at their profits, or is this being engineered?” Caruana questioned, as he lamented that there are billions of euros that will likely never be recovered.

In a pre-budget event last week, Caruana said that restaurants pay an average of just €4,500 in corporate income tax per year – lower than most average citizens.

Caruana had been asked about the possibility of the government introducing a lower VAT rate for restaurants – a proposal which did not make it into his speech earlier this week.

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It would be wrong to think that all those failing to declare profits are evading tax. It is a known reality that local businesses are still having to navigate through uncertainty on multiple fronts, rising costs, especially fast increasing labour costs, excessive bureaucracy, increased competition and oversaturated markets, all of which tighten margins. The Malta Chamber feels it necessary to emphasise the importance of fairness, responsibility, and balance within the national discourse. While we fully recognise Government’s concerns, it is equally essential that those who are compliant (whether operating as companies or under self-employed status) are not unfairly tarnished or overshadowed by those who evade their obligations.

However, The Malta Chamber strongly supports efforts to address gaps in addressing instances of tax evasion, as effective collection is fundamental to safeguarding national competitiveness and ensuring a fair level playing field. Such efforts would yield more effective results towards tax compliance, than generic pronouncements that tend to put all businesses (whether companies or self-employed) in a bad light. Such statements are especially damaging and unfair on ethical and law-abiding businesses.

In its Pre-budget documents, The Malta Chamber has repeatedly called for smarter, incentive-based approaches to tax collection. The Malta Chamber favours a tax collection system which is structured in a way to support businesses and self-employed that fulfil all their financial obligations in a timely manner, thereby aimed at rewarding compliance, improving cashflow for ethical operators, and ultimately encouraging timely payment by all businesses. It is also one of the reasons why The Malta Chamber has consistently insisted for a Public Procurement Reform, including the introduction of effective and proper white listing and black listing – it is unjust to have taxes collected from law-abiding businesses and citizens to fund procurement which is awarded to those who evade their fair share.

The Malta Chamber is also of the opinion that moving to a cashless economy will also help curb tax evasion as it prioritizes digital transactions over physical currency, increasing efficiency and record-keeping.

The Malta Chamber remains committed to dialogue and cooperation with government and stakeholders to implement practical reforms that promote ethical conduct and protect law-abiding enterprises. Malta’s continued prosperity depends on a transparent, just, and competitive business environment – on everyone, without exception, paying their fair share.

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Tax revenues increased by €1,179.0 million over the previous year, reaching a total of €6,769.9 million. This figure accounted for 86.4 per cent of total general government revenue in 2024.

All main categories of tax revenue recorded growth, with direct taxes remaining the largest component, followed by indirect taxes and social contributions, the NSO added.

Direct taxes totalled €3,457.5 million, making up 51.1 per cent of the overall tax revenue. This marked an increase of €908.6 million over the previous year. The primary component within this category remains the Personal Income Tax, which rose by €238.1 million, reaching €1,770.7 million. Corporate Income Tax registered a significant increase of €588.6 million, standing at €1,424.7 million.

Indirect taxes amounted to €2,139.9 million, an increase of €166.1 million when compared to 2023, and represented 31.6 per cent of total tax revenue. Within this category, the Value Added Tax (VAT) component stood at €1,401.2 million, up by €132.4 million from the preceding year. Moreover, Taxes on Products totalled €594.2 million, an increase of €31.9 million compared to 2023. This increase was mainly attributable to higher tax revenue generated from duty on documents and gaming taxes. Other Taxes on Production increased by €4.1 million, reaching €117.9 million in 2024, the NSO said.

Social contributions, which include payments by employers, employees, as well as self- and non-employed persons accounted for 17.3 per cent of the total tax revenue in 2024, amounting to €1,172.5 million. This reflects an increase of €104.4 million when compared to the preceding year.

The overall tax burden represents the total amount of taxes and social contributions, expressed as a percentage of Gross Domestic Product (GDP). Malta’s total tax burden stood at 29.3 per cent in 2024, an increase of 2.6 percentage points over the 26.7 per cent recorded in 2023. The data shows an average tax burden of approximately 30.3 per cent for the period between 1995 and 2024. This indicates a relatively stable tax environment during these years, with variations around this average, including values ranging from as low as 25.5 per cent and as high as 34.0 per cent.

By the end of 2024, direct taxes (which also include Capital taxes) accounted for 15.0 per cent of GDP, an increase of 2.8 percentage points compared to 2023. Indirect taxes represented 9.3 per cent of GDP, while the share of social contributions made up 5.1 per cent of GDP.

Income Tax receipts by ESA 2010 institutional sector

In 2024, the Household sector contributed more than half of the income tax collected by the general government, accounting for 55.4 per cent of the total, equivalent to €1,775.2 million. Contributions from the Non-Financial Corporations and Financial Corporations represented 22.6 per cent and 21.7 per cent, respectively. Non-profit Institutions serving Households, General Government and the Rest of the World collectively made up the remaining 0.4 per cent of the total.

In absolute terms, income tax receipts increased by €829.4 million over 2023, primarily driven by higher receipts from Financial Corporations (€302.6 million) and Non-Financial Corporations (€279.5 million). Income tax paid by Households also rose significantly, increasing by €238.9 million during the year.

Environmental taxes

In 2024, total environmental tax revenue increased marginally by €1.0 million, reaching €312.5 million. This figure represents 4.6 per cent of total revenue collected from all taxes and social contributions, and 1.4 per cent of GDP. Energy taxes (which include taxes on transport fuels) constituted the largest share of environmental taxes and increased by €5.0 million, mainly due to higher revenue from emission trading permits (€4.5 million). This increase was partly offset following a decrease in revenue generated from Transport taxes.

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Finance Minister Clyde Caruana said that government is cracking down hard on unpaid taxes, vowing that no individual or business will be spared if found in breach of tax laws.

Speaking in Parliament during a debate on amendments to tax law, Caruana signalled a sterner approach to enforcement, and a newly implemented system has equipped authorities with the necessary tools and increased surveillance to clamp down on tax evaders.

“What needs to be collected will be collected,” Caruana said, warning that non-compliance would be met with serious consequences.

Caruana said that no government before this one has invested so heavily in the country’s tax collection system, which was intentional.

He said that the newly implemented system has identified 80% of people found of evading tax, and the system is able to scan all of the country’s taxpayers in a single day, helping authorities pinpoint those who have failed to pay, with such scans carried out monthly.

Caruana said that the system is also able to compute audit trails, providing authorities with data to identify irregularities.

“This is not about punishing people, but about restoring fairness in the system. Those who have always paid what they owe should not be undermined by those who do not,” Caruana said.

Caruana criticised the PN over its statements that the proposed bill “rewards tax evasion,” deeming such claims as false.

PN MP Graham Bencini spoke of his concern on the proposed bill, saying that it seems to favour individuals with ongoing court cases related to tax evasion or unpaid dues.

Bencini also alleged that one of the potential beneficiaries is a former client of the Prime Minister, and said that instead of passing this law, government must focus on offering more flexible payment schemes and reducing interest rates and fines to support small and medium-sized businesses.

Caruana told Parliament that the government has significantly ramped up penalties for tax evasion, with fines now set at 25% of the amount due, up from the previous 15%.

He said that if someone owes €1 million in taxes, they would now face an additional €1 million in unpaid dues, €136,000 in interest, and the new, steeper penalty, bringing the total recovered by the state to roughly €1.5 million.

“I have a duty to collect what is owed,” he said, adding that prison sentences serve little purpose in such cases.

Instead, raising fines is proving more effective in both recovering funds and deterring tax evaders from taking the risk, Caruana said.

He said that while the government has always offered assistance to those in need, and has never turned them down, there is now a firmer stance on compliance.

Caruana said that stronger tax enforcement has also played a role in reducing Malta’s budget deficit, a trend acknowledged by both the International Monetary Fund and the European Commission.

The Finance Minister said that he has stayed true to his earlier pledge to tackle tax evasion head-on.

“What needs collecting, will be collected,” Caruana said.

The bill passed the Committee stage with 38 in favour, and 28 against.

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Direct taxes were the main driver of revenue, totalling €2,548.9 million, up €194.5 million from 2022. Personal Income Tax contributed the lion’s share of this increase, with an additional €138.2 million collected. Corporate Income Tax also saw an uptick, contributing €41.3 million more than in the previous year. Following new guidance from Eurostat, revenues from Malta’s Individual Investor Programme (IIP) were reclassified as tax income, boosting the “Other Current Taxes” category.

Indirect tax revenues also rose, totalling €1,978.3 million, which is 35.4% of total tax revenue. Key contributors included the Value Added Tax (VAT), which added €79.3 million, and taxes on products, which grew by €52.8 million. Higher revenues from motor vehicle registrations and document duties bolstered these gains, although declines in gaming and cement excise taxes provided a partial offset.

Social contributions from employees, employers, and self-employed persons amounted to €1,068.2 million, making up 19.1% of the total tax revenue. This category rose by €77.6 million from the previous year.

Environmental taxes also showed significant growth, reaching €315.5 million, an increase of €28.2 million. Of this, energy taxes—including those on transport fuels—accounted for the largest share, with emission trading permits generating €9.4 million more than in 2022.

In GDP terms, direct taxes contributed 12.3%, while indirect taxes and social contributions contributed 9.6% and 5.2%, respectively. Overall, the report reflects Malta’s stable and diversified tax environment, with tax burdens remaining close to the national average of 30.4% over the past three decades.

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Alfred Sant stated that it is imperative to maintain differentiated tax systems in Europe especially when it comes to geographically remote areas. This will enable these territories to compete effectively within the Single European Market. By contrast, tax harmonization would stimulate the flow of resources from peripheral regions to central areas within the Union, thereby undermining economic and social cohesion, he argued.

One of the central components of the European Parliamentary Week was the Interparliamentary Conference on Stability, Economic Coordination and Governance in the European Union. The conference brought together MEPs and members of the EU’s national parliaments from across Europe to exchange views on future policy options. It included a plenary discussion about the single market and taxation which was co-chaired by Dita Charanzová, Vice-President of the European Parliament and Marie Lecocq, Vice-Chairwoman of the Committee on Finance and General Affairs of the Brussels Regional Parliament.

The participant panel speakers included Vincent Van Peteghem – President of the Economic and Financial Affairs Council (ECOFIN) and Deputy Prime Minister and Minister of Finance of Belgium and Christian Leysen – Chair of the Committee on Energy, Environment and Climate and deputy Member of the Committee on Energy, Environment and Climate and deputy Member of the Committee of Finance and Budget, Belgian House of Representatives. The discussion revolved around the Treaty of the Functioning of the European Union (TFEU) and how it produces directives aimed at harmonizing laws across Member States, especially in areas impacting the Single Market such as taxation.

Labour MEP Alfred Sant criticized the current ambiguity surrounding concepts like aggressive tax planning and tax avoidance. Their definition had become politically charged. Crucially, Sant emphasized that worries about differentiated tax systems leading to money laundering and tax evasion could best be met by insisting on more transparency in tax policies and procedures. There would be a full justification to call for a greater foucus on enhancing transparency across differentiated tax systems within the Single European Market, he noted.

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There have been significant changes in employment laws in Malta in recent years. These changes include an increase in the minimum wage and expanded worker rights such as parental leave. In 2023, Malta’s minimum wage increased by 5.4% to €192.73 per week. This was a substantial change aimed at improving the living conditions of workers in the country.

Moreover, the government has been focused on expanding worker rights. Parental leave is one such area that has received considerable attention. Providing employees with the ability to take leave for family matters is essential in modern societies, and Malta has adapted its legislation accordingly.

Projected Long-Term Effects of Law Changes on Payroll Tax

The changes in employment laws, particularly the increase in the minimum wage, are expected to have long-term effects on payroll tax in Malta. With higher wages, the amount of payroll tax collected by the government is likely to increase. This could potentially lead to an increase in government revenue, which could be used for further investments in public services and infrastructure.

Furthermore, these changes might encourage more people to enter the workforce, knowing that they are protected and will earn a fair wage. This could, in turn, result in an increase in the overall tax base.

Implications of the Changes for Businesses in Malta

For businesses in Malta, the recent changes in employment laws mean that they will need to adapt their payroll systems to accommodate the new minimum wage. This could lead to increased costs for businesses, especially for those employing a large number of minimum wage workers.

Additionally, the expansion of worker rights such as parental leave might require businesses to re-evaluate their human resources policies. They will need to ensure that they are compliant with the new laws and that their employees are well-informed about their rights.

Comparisons to Payroll Tax Systems in Other European Countries

When compared to other European countries, Malta’s payroll tax system is evolving to become more in line with the European standards. Many European countries such as France and Germany have already implemented higher minimum wages and extensive worker rights, and Malta is now following suit.

However, it is important to note that each country has its unique challenges and economic conditions. Therefore, while Malta is making progress, it must also ensure that the changes are sustainable and do not adversely affect the business environment or employment rates.

Conclusion: Navigating the New Landscape of Payroll Tax in Malta

The recent changes in employment laws, including the increase in the minimum wage and expanded worker rights, represent a significant shift in the landscape of payroll tax in Malta. Businesses need to be vigilant and adaptive to these changes, ensuring compliance and proper communication with their employees.

While the increased minimum wage and expanded workers’ rights are steps in the right direction, it is essential for both the government and businesses to work together to ensure that these changes are sustainable in the long term. The government should monitor the impact of these changes and be prepared to make adjustments if necessary. Likewise, businesses should be proactive in updating their policies and practices to reflect the new laws.

Through cooperation and diligence, Malta can forge a path that not only upholds the rights of workers but also fosters a robust and thriving business environment. This new landscape of payroll tax is a labyrinth that will require careful navigation, but with the right tools and knowledge, Malta can ensure a prosperous future for its workers and businesses alike.

Brought to you by Alica Modesty

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The Minister announced this during the presentation of the strategic plan for the Malta Tax and Customs Administration strategy.

He explained that this new program, which he described as being of advanced technology, follows the steps taken in other countries such as New Zealand, Ireland, Canada, and the Netherlands.

Caruana said that this new technology will cut the time taken for tax checks, which currently usually take days or even months. He said that thanks to the registrations which the government has, this new program will run checks on a daily basis on the wealth of individuals and businesses and will compare it to the amount of taxes filed.

In giving an example, the minister said if a person were to file taxes on a piece of land which cost around €1 million, the system would ascertain that the amount due is given by comparing the taxes which have been filed to the wealth which the individual has registered.

This €3 million investment forms part of the presented strategic plan the administration of taxes and customs between 2023 and 2025.

“This is the change in culture we need”, the Minister said, whilst also referring to late tax payments, adding that this ensures that checks are not done just “when an anonymous letter is filed.”

He said that a change in culture can already start to be seen as during last year, an effort on the VAT collection front rendered an increased income of €240 million.

The Tax and Customs Administration seeks to gather several previous authorities under one roof.

The creation of the Office of the Commissioner for Revenue in 2012, and the enactment of the Commissioner for Revenue Act that same year, marked a major shift in Malta’s tax administration.

It established the legal framework for integrated revenue collection under the direct responsibility of the Commissioner for Revenue (CfR), replacing the decades-long arrangement where this function was spread across multiple directorates.

The minister said that this new department is responsible for 92.5% of the whole government’s income. Thus “we need to ascertain that what is due to the government is paid, so that we can give the people the level of service they deserve.”

Caruana said that this new strategy implies two things: making better use of existing revenue – ‘doing more with less’, and ensuring that all tax dues are collected when they are due.

He added that as the Minister for Finance, it is his responsibility to keep educating businesses and individual taxpayers to put an end to the mindset of delayed payments and systematic non-compliance, for the sake of ”good governance and fairness.”

On his part, Commissioner for Revenue Joseph Caruana said that the organisation will be investing heavily in transforming its technology infrastructure to prepare the foundations for real-time reporting.

“This investment will support our work and provide a better service to our clients”.

He said that by making greater use of Business Intelligence and developing the application of advanced analytics, the office will be able to harbour new ideas and approaches to compliance, predict future trends, and help better tailor compliance interventions for the best results.

Mentioning the strategy, the Commissioner said that “this transformation” will also allow for improvements in the organisation’s workplace to make it more accountable to deal with the new responsibilities outlined in the plan.

“I want to see the organisation break down the silos that exist within some parts of it and truly achieve a unified tax and customs revenue organisation,” he said.

Present for the press conference was also Andja Komso on behalf of the International monetary fund, which is an organisation which supports economic policies that promote financial stability and monetary cooperation, which are essential to increase the creation of jobs and the stability of the economy.

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Mazars, the international audit, tax and advisory firm, today releases its global financial results for the 2021/2022 financial year, highlighting double-digit year-on-year growth of 16.4%, reaching €2.45bn in fee income. The increase in revenue comprises strong growth across all regions and services, both audit and non-audit (full details below).

Such financial performance confirms Mazars’ strong international position and the relevance of its uniquely integrated model, as well as boosting confidence in the firm’s continuing ability to create value for clients. In a fast-changing environment, Mazars supports companies of all sizes in their quest to grow responsibly; comply with an increasing number of complex regulations; embrace transformations to enhance their business operations or internal systems; and meet the expectations of regulators, talent and society to secure long-term performance.

“2022 was an eventful year that tested the agility of companies everywhere. These disruptions, coming on top of longer-term trends including digitisation and sustainability, can be challenging, but they also offer vast opportunities to grow, develop and explore new ways to create value. In this unsettled context, Mazars’ role, more than ever, is to be a trusted partner to clients,” says Hervé Hélias, CEO and Chairman of Mazars Group.

Balanced growth across regions and portfolio of activities

Strong performance across regions and services reflects, on the one hand, Mazars’ international expansion, operating at scale effectively as ‘one team, one firm’, with a presence in nearly 100 countries. On the other hand, it highlights the relevance of the firm’s multidisciplinary approach: Mazars’ development strategy is to keep the right balance between its regulated services and its tax, consulting or advisory services. The firm is convinced this diverse portfolio is essential to the quality of audit, the relevance of the services rendered to clients, the attraction and retention of the best talent and, ultimately, the public interest.  

Commenting on the firm’s financial results, Hélias continues: “Despite a complex global environment, 2022 was an excellent year for Mazars across geographies and service lines. Our performance confirms the quality and relevance of our services. Mazars’ ability to continuously grow its audit position among large and listed companies offers choice and a different perspective in a highly concentrated market; this competition is essential for the healthy functioning of financial markets. We also offer a deep understanding of sector-specific environments, issues and trends, and stand out as a leading audit firm in financial services, working with some of the largest organisations in the industry.”

Mazars in Malta

Meanwhile, Mazars in Malta also registered a very positive performance during this reporting period. In fact, the firm, which now employs more than 85 professionals under the leadership of four partners, recorded a 10% increase in turnover, up to €5.16 million, 47% of which was in respect to audit services. Commenting on these results, Managing Partner Anthony Attard states that Mazars in Malta owes its success to its people – which the firm considers as its most invaluable asset: “These have been key towards adding value to the delivery of Mazars’ customised solutions in Malta, and the consolidation of our position as one of the leading audit, tax and advisory firms on the local market, committed towards maintaining the highest possible quality standards.”

This year, Mazars in Malta is also commemorating its 25th Anniversary. Attard explains that while such an event is always a special milestone for any organisation, “we see celebrating our quarter-century of operations as an opportunity to bridge the values and strengths which have defined our success, with the firm’s fundamental purpose and vision – that of continuing to create value together with our stakeholders, and investing in what matters for our people, our clients and the local community. Hence the theme we have selected for these celebrations: ‘Growing with purpose together’ ”.

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INSOL Europe will also be present at the conference through various speakers and participants, including INSOL Europe CEO, Paul Newson. Reuben M Buttigieg, Erremme Business Advisors’ Director and Malta’s Country Coordinator for INSOL Europe will also address the conference. Titled “50 shades of insolvency for small business”, Buttigieg’s intervention together with Erremme’s Edward Spiteri will outline how many small businesses can avoid insolvency if action is taken when the first challenges start appearing.  When heading towards a destination, many normally focus on the road ahead of them and do not observe any shade which could prove problematic around them, since they are too focused looking ahead. Nevertheless, whilst this shade may be an indication of danger, false shade may create danger. In this context, this session shall discuss potential pitfalls which arise when entrepreneurs over focus on one goal and they miss these warning signs, leading to serious repercussions.

Reuben Buttigieg commented, “Erremme Business Advisors decided to sponsor and actively contribute to the conference for it truly believes that the changes in legislation were long overdue and now, entities like Erremme have the legal institutes to assist businesses turn around their financial positions. It is a change in culture also for entrepreneurs and we hope that the necessary information campaigns are invested in by the authorities and constituted bodies.”

Furthermore, the conference will include dynamic discussions by leading industry experts as well as networking opportunities with other professionals within the sector. It will also present a unique opportunity to determine new trends and corresponding solutions, while providing attendees with the chance to participate in the conversation shaping the future of insolvency.

More information and full programme can be found on: https://www.facebook.com/maltaacademyfortaxationstudies

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