The second lowest tax burden across the EU

In recent years Malta's position has improved substantially due to the introduction of schemes such as social benefit tapering and the introduction of the in-work benefit.

Eurostat estimates show that Malta has the second lowest tax burden across the Europea Union. In fact, in Malta a single person on low income who does not have children faces a 25% burden when it comes to tax and social security contributions. This contrasts with an average of 40% across the euro area.

The most heavy burden is found in Belgium, where low-income workers ends up losing more than 46% of their income in tax and social security contributions. In Germany the taxman’s take is slightly lower, 44%, whereas in our neighbouring country, Italy, the tax burden reaches more than 40%. In contrast, in Cyprus low-income workers pay less than Malta, as they face a tax and social security contribution rate of just over 18%.

Eurostat also calculated another indicator, which it denotes as the unemployment trap. This is an estimate of the income lost through tax charged and loss of social benefits when a person starts working. Here, the estimate is that a Maltese person loses around 66% of their additional income when they start working.

Malta has the second lowest weight among the European area countries, just behind Cyprus, where the loss is of 64%. In contrast across the euro area the average loss is 76%. But there are a number of countries where the burden is much greater. For example, someone in Lithuania who gets a job ends up earning 4% less than they did when they were unemployed. In Belgium, an unemployed person who opts to work gets a raise of just 7%, which is five times less than the gain made by a Maltese unemployed person who finds work.

In recent years Malta’s position has improved substantially due to the introduction of schemes such as social benefit tapering and the introduction of the in-work benefit. The first measure means that someone finding a job does not lose their unemployment benefit immediately but instead keeps part of it after three years. Thanks to the second measure, when a person starts working and is on low income, the Government grants them a benefit that tops up their wage.

As a result more people have opted to leave benefits and start employment, a development that is of great benefit to Malta’s economy.

Photo: iStock

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

Menu