Lowest tax burden in two decades

In 2020, the burden of taxes on the national economy fell to 30.4% of GDP. This is the lowest level in two decades.

Official NSO data show that during the pandemic, apart from investing heavily to sustain the economy, the Government continued to reduce the tax burden.

The tax burden has been consistently going down for a number of years, from 32.8% in March 2013, to 31.5% at the start of this legislature in 2017 to 30.4% in 2020.

In simple terms this means that compared to the tax that was paid on every €100 of income under the last conservative government, now families and businesses are paying €2.40 less.

During 2020, Government eased the burden of taxation from 30.6% of GDP to 30.4%, giving some relief to firms and households. By contrast in 2009, a conservative administration had raised the burden of taxation from 33.0% of GDP to 33.1%. This besides the rise in fuel prices and electricity bills that was also imposed during this period of hardship.

The rest of the EU is experiencing the highest tax burden in 2 decades. 

In the aftermath of the financial crisis, a conservative administration raised more revenue by taxing families and businesses harder. By contrast in 2020, a Labour administration offered deferrals and implemented tax cuts that meant that revenue fell below the level observed two years earlier. This respite strengthened firms and households’ liquidity and ensured that they were not scarred by the pandemic in the same way that they had been negatively affected in the 2008 financial crisis.

A rise in tax burden across the EU-27

The current administration in 2020 also acted very differently to the administrations in the rest of the European Union. Across the EU-27, the tax burden rose from 41% of GDP to 41.3%. The latter was the highest tax burden in two decades. This explains why unemployment in the European Union remains high and the level of employment is not forecast to recover for several years, even when GDP starts to rebound.

The progressiveness of the economic policy implemented by the current administration is the reason why Malta’s recovery is job-rich and broad-based. In other countries while small and medium-sized firms have gone under, the big firms are doing well.

In Malta the assistance provided ensured that small and medium-sized firms proportionately got a much better deal than bigger firms. This meant that Government assistance was focused on those who needed it most and not just on those who had the resources to face the pandemic.

With the tax reductions announced in the Budget for 2022, one can safely predict that the trend of declining tax burdens will continue, driving forward economic growth and creating a new prosperity.

0 0 votes
Article Rating
Subscribe
Notify of
guest
0 Comments
Inline Feedbacks
View all comments

Menu