Finance Minister Clyde Caruana has fulfilled his pledge of collecting more taxes and clamping down on tax evasion. The results are positive, objectively speaking, in terms of collection, but they may not necessarily reflect increased economic growth either. According to the latest NSO figures:
Between January and November 2022, Recurrent Revenue amounted to €5,107.6 million, 12.2 per cent higher
than the €4,553.2 million reported a year earlier. The largest increase was recorded under Value Added Tax
(€236.0 million), followed by Income Tax (€190.6 million), Social Security (€141.0 million), Grants (€52.0 million),
Reimbursements (€7.5 million), Rents (€2.9 million) and Licences, Taxes and Fines (€2.1 million).
Up until November, the government still spent more than €63 million than it did last year, which was a very significant year for government spending due to the Covid pandemic. The government is still heavily underwater with a deficit of €620 million. Malta’s economy is projected to remain heavily dependent on government spending for the years to come, yet the government has already exceeded the debt estimates to a significant degree. As the government’s supply of debt increased significantly it is now turning to the international markets to find new buyers, and this brings with it bigger risks. So far, most of our debt has been bought locally and that minimises risks from foreign markets. It has been very easy so far to manage our own little Ponzi game but turning to international markets means that the financial standards have to increase significantly as well.
Last year Malta experienced around 0% economic growth in real terms because GDP figures do not factor in inflation which has soared dramatically both for the consumer and the industries. Additional gains for businesses and workers were eaten away by inflation. Economic growth needs to ramp up significantly to offset the losses which have been incurred since the Covid pandemic.