Malta Employers Welcomes Forward-Looking Budget that Balances Social Measures with Productivity Incentives

Measures to boost productivity, social wellbeing and smart economic growth are largely in line with its proposals.

In its initial reactions to the national budget speech, the Malta Employers’ Association acknowledges a national budget for 2026 that judiciously balances the country’s social imperatives with measures designed to enhance productivity. This approach resonates with Malta’s new Economic Vision for 2050 and the guiding principles of the Draghi report, both of which emphasise the critical need for resilience, innovation, and the capacity to climb the value chain as foundational elements for sustainable prosperity.

Fiscal Consolidation

The Association acknowledges Government’s success in consolidating public finances and curtailing further the fiscal deficit. This achievement towards exiting the European Commission’s Excessive Deficit Procedure by end-2026 are particularly welcome because fiscal progress is being driven by stronger efficiency in tax collection. The Malta Employers Association strongly upholds the principle of Fiscal Morality, both in ensuring compliance with tax obligations and in the responsible use of public funds. Fair and efficient tax collection is welcomed because it:
(a) promotes a level playing field by ensuring fairer competition among operators, and
(b) provides the fiscal space for targeted public investment to support industry transformation.

Productivity Enhancing Measures

In terms of the latter and in close alignment with Malta Employers’ own recommendations, the Government has unveiled a comprehensive framework of fiscal measures intended to catalyse investment in smart economic growth. These policy instruments are expressly consistent with the calls in the Draghi report for accelerated technological adoption, increased competitiveness, and the fortification of economic resilience to external shocks.

The announced measures include:
• Accelerated Write-off Scheme: Provision for accelerated tax write-off over a two-year period for qualifying expenditure in Artificial Intelligence, digitalisation initiatives, cybersecurity, and associated professional training. This incentive directly supports the Association’s calls for forward-looking capital investment that strengthens national productivity and future-readiness.
• Expanded Malta Enterprise Microinvest Scheme: Extension of tax credit coverage for eligible expenditure, including wage costs, with heightened support thresholds. This measure supports small and medium-sized enterprise development and supports SMEs in retaining their human resources in this tight labour market.
• Profits Reinvestment Measure: Introduction of a 60% tax credit on qualifying investments executed within the next two years, with the credit realised over four years at 15% annually. This is designed to encourage the reinvestment of profits in productivity-enhancing activities.

The Association is gratified to note that its proposals for targeted entrepreneurial; support have been incorporated in full into the budget speech, utilising the maximum parameters of State Aid permitted under the European Commission’s de minimis regulations.

Economic Diversification

Malta Employers welcomes the announcement that Government is considering the issue of an international call for the establishment of a free-zone logistics hub. The Association supported recommendations in this regard in line with Malta Vision 2050. This project may attract multinational logistics-focused companies, contributing to diversifying Malta’s economic base.

In terms of tourism, Malta Employers noted the significant increase in eco-contribution paid by the tourist but expected more concrete measures and direction towards increasing quality and enhancing visitor experience through improvements in the general environment, friendliness, professional service, relevance and upkeep of attractions.

Environment and Education

The Association has taken note of various references to environmental issues in the budget speech and attempts to address them through various measures and projects announced. Nevertheless, there does not seem to be any concrete commitment to steer away the economy from excessive construction to other sectors.
Malta Employers takes note of the consistent increase in public expenditure in Education. This is also very positive in itself but the socio-economic interest of the country requires more tangible and commensurate results from such expenditure. The Budget Speech falls short of announcing tangible measures in the area of reviewing Malta’s Education system to support an economic transformation that the country requires.

Demographic Challenges

Malta Employers has consistently advanced policies that address Malta’s demographic and socio-economic challenges and in this context, it welcomes the announced generous tax cuts for parents. Nevertheless, the Association continues to maintain that Malta’s declining birth rate is a multi-faceted challenge that requires a national, cross-sectoral response. Whilst welcome, fiscal measures of the sort announced in the budget speech must for part of a holistic plan which must also include awareness-building initiatives, incentives for flexible work arrangements and stronger childcare and parental support infrastructure to render family life more compatible with professional aspirations.

In terms of labour force rationalisation measures, the Association commends Government on taking its heed in introducing measures that encourage a voluntary extended participation of older individuals in the labour force but fall short of ironing out the remaining fiscal anomalies that encourage people who have accumulated enough social security contributions to exit the labour force at the age of 61. The Association strongly believes that in the current circumstances, the country can ill-afford to lose precious human resources and that every effort must be made to encourage older workers to remain active in the labour force on a voluntary basis. This approach will benefit workers, employers, and the national economy alike.

ENDS

27 October 2025