Malta’s deficit will carry on into 2021, no plans to increase taxes – Finance Minister

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The deficit Malta experience in 2020 due to the COVID-19 pandemic will carry on into the next year but there is no plan to increase taxes in the upcoming budget, Finance Minister Edward Scicluna said.

He was addressing a press conference wherein he launched the PreBudget Document for 2021 on Wednesday morning which outlined Malta’s economic status and the government’s plan for its growth.

“The background on which we are building this year’s budget is not the normal scenario, and this is the time for the government and civil society alike to show its ability to deal with a crisis,” Scicluna said.

He explained that the way one person deals with such a situation is by being prepared from beforehand and not addressing it when it hits.

“This government started working from day one on this as it did not want to see any deficits and debt which would close off any possibilities when a crisis hit. We were criticised for all the talk about surplus but now people can see the result of all this.”

However, he warned that despite the government’s efforts, it cannot spend everything mindlessly as one has to stay focused and see what is of top priority.

He added that even if we get the vaccine by December, Malta will still be challenged economically.

“The debt that the PN accumulated was caused by a lot of spillage coming from empty hopes and promises. They anticipated big money to come in immediately, however, we focused on working within our parameters and let the results speak for themselves,” he explained, saying that economy needs time to breathe.

“We were one of the first countries that managed to give banks the liquidity they needed through tax deferrals in order to give the economy the oxygen it needed, not to mention the moratorium measures.”

When it comes to economic growth, the first quarter was great for Malta as no major lockdowns were issued and profits were higher than other countries’. Nonetheless, Scicluna said that “in the second quarter, we released how, even though we have great industries like gaming or financial services, the closure of the tourism industry was extremely powerful in our country which is why our profit decreased by 16% which is still not as bad as other countries.”

Speaking about the wage supplement and the vouchers, Scicluna explained how these measures favoured the smaller businesses since when the financial aid is capped at a certain amount, the percentages become more beneficial the lower one goes in the scale.

On a concluding not he said; “for next year, we expect the deficit to rise and the biggest question is; how great do we afford it to be? The more measures we implement higher it will get and the higher it will get the more work we will have to put in to reduce it afterwards.”

He said that Malta does not want to increase taxes which is why the government is being cautious about not having next year’s debt as a recurring problem in the future – “so we will keep the same taxes and see that will have a break even.”

He explained that each country wants this economic situation to be V-shaped wherein they feel the effect but then go back to the exact spot it was in before, the more symmetrical the V the better. “We are faithful that with continuous work we can find a balance between economic growth and health precautions.”