Editorial | A budget that targets growth

It is unlikely that Finance Minister Clyde Caruana will spring any surprises when he stands up in parliament on Monday to deliver Budget 2023.

The minister has been quite upfront about the challenges the country faces over the next 12 months within an uncertain global context.

Government has made a commitment to continue subsidising energy, fuels and grains to the tune of more than €600 million next year. Undoubtedly, this will be one of the major budgetary commitments that is necessary to imbue stability and allow businesses to plan ahead. Supporting families, especially the most vulnerable, in these difficult times should also be a priority.

But the budget will be more than just energy subsidies and support for families. Caruana will be expected to announce measures and projects, which will give the economy direction. The budget should target growth as much as it acts as a shield from inflationary pressures.

Caruana will be expected to indicate how the government will keep a tight grip on public finances so as not to run unsustainable deficits. Undoubtedly, the country will continue benefitting from the surplus of past years and be able to borrow more while remaining within sustainable parameters. Caruana still has leeway, which, however, he should use judiciously.

From a business perspective, companies need clear direction as to what government has in mind as regards foreign labour. Different sectors are clamouring for adequate access to foreign labour markets through a more efficient visa processing system.

Coupled with this is the need to have more incentives that encourage Maltese workers to upskill or reskill in response to changing industry demands.

The government needs to lay down a clear vision of where it wants to take the labour market and this leader expects the first signs of that vision to be laid down in the budget.

Caruana has made a commitment in the run-up to the budget not to introduce new taxes or increase existing taxes.

It is expected that taxation rates will not be touched at all in this budget as Caruana tries to keep public finances on a sustainable footing.

However, this leader believes that the government should seriously consider a proposal put forward by the Chamber of Commerce to reduce the top corporate tax rate from 35% to 25% for businesses that pay their dues on time.

Rather than a simple tax cut, this is more a tax incentive for companies that honour their obligations by giving them a competitive advantage over others that skive on tax. Although this tax measure means government will lose income, it can also serve as an incentive to curb tax evasion and thus create a new source of income because more will be paying tax.

Curbing corporate tax evasion is necessary not just to bolster public finances but also to ensure companies operate on a level playing field.

Government will not need to lower the tax rate itself but reimburse the difference between 35% and 25% to those companies that pay on time and in full.

A third important aspect that requires clear direction is investment in the renewable energy sector on a large scale. Government must take a clear position on the location and incentives for offshore floating windfarms and floating solar panel farms.

The Russian invasion of Ukraine and the subsequent crisis in the energy sector it has created, makes it incumbent on Malta to continue investing in a diversified energy sector.

Plans for a floating windfarm off the northern shores of Gozo unveiled a few years ago must now come to fruition, while government should give clear direction as to how areas within Malta’s exclusive economic zone could be utilised for renewable energy projects.

The budget must not only offer support to families in a context of rising inflation but should also target economic growth by providing incentives for the private sector to invest.