What should CEOs pay attention to in Malta’s upcoming budget?

With Malta’s 2025 Budget set to be unveiled on 28th October, business leaders across the country will be keen to see which proposals will directly impact their operations.

From tax cuts and labour market strategy to infrastructure spending and sustainability measures, several budget items could shape the landscape for CEOs in the coming year.

1. Taxes

One of the most anticipated aspects of the upcoming budget is the tax cuts targeting “the middle class”, as Prime Minister Robert Abela announced, with Finance Minister Clyde Caruana clarifying that even those earning €25,000 or €30,000 annually will benefit. This proposal is expected to have a knock-on effect on consumer spending power, potentially boosting local businesses that cater to the domestic market.

Mr Caruana also shared that the proposed income tax cut will cost the Government more than €100 million.

During the same conversation with Times of Malta editor-in-chief Herman Grech, Mr Caruana also discussed corporate taxes, saying now is not the time for a change in this regard. The Minister had caught the business community’s attention when last year he claimed that details around the new system will be announced in the 2024 Budget speech. This did not take place, with Malta exerting its right to delay the minimum corporate tax rate being discussed by the Organisation for Economic Co-operation and Development (OECD) of an effective 15 per cent for companies with a turnover above €750 million. He also said that Malta must now agree with the EU on such reform, in line with this global initiative.

When asked on why he does not favour adding taxes as a tool to generate more income for Government, Minister Caruana said: “I prefer to leave money within the business community rather than having that money spent in an ineffective way. Government is not the ideal agent to spend money. We have overruns, things that run over budget… let’s collect what is due, but I don’t see the need to collect more by imposing new taxes or increasing the rates.”

2. Labour market strategy

The Government has hinted at changes to its labour migration policies, aligning them more closely with Malta’s economic needs. As Malta’s economy continues to rely heavily on foreign workers, especially in sectors like hospitality, construction, and iGaming, any revisions to immigration policies could have significant repercussions.

Foreign workers now also compromise a third of the workforce, and the pre-budget document says that the Government “has begun revising its labour migration policies to meet future challenges. The new policy will seek to better align migration with the actual needs of the labour market.”

Mr Caruana has said that “we need foreign workers. The issue is, how many? That is what we need to answer… In Europe the more you emit, the more you have to pay. I think we can study a similar model for our labour market.”

“I used to say this country needs more foreign workers, and I stand by what I said back then. But over time I used to advise, quietly at first and perhaps then a bit more vociferous, that ‘we have to be careful; this cannot continue going on forever.’… I’ve been having this discussion [for] six years or something like that,” he added.

Dr Abela rejected claims that Malta’s economic growth was fuelled purely by the boom in foreign workers, and on a radio interview on ONE, he spoke about the need to focus on the creation of quality jobs, rather than focusing purely on employment numbers.

With a possible focus on streamlining immigration procedures for skilled workers and tightening regulations for lower-skilled sectors, businesses relying on foreign labour will need to stay ahead of these changes to avoid a possible disruption to their workforce.

3. Focus on infrastructure and public services

As Malta’s population grows, driven partly by the influx of foreign workers, the pressure on public services like healthcare and education is mounting. The Government is expected to address these issues in the budget, with a focus on improving the infrastructure of essential services like waste management, road and water management infrastructure, and also charging infrastructure, amongst others.

CEOs, particularly those in industries where workforce stability and access to healthcare and education are essential (such as manufacturing, logistics, and professional services), should keep an eye on this aspect of the budget.

 4. Sustainability initiatives

The Government’s commitment to sustainability is likely to be reinforced in this budget, building on previous pledges under the European Green Deal.

Businesses in sectors like construction, energy, and tourism could see new regulations or incentives aimed at promoting sustainable development.

According to the pre-budget document, the Government aims to shift towards more sustainable and innovative sectors, such as green technology, renewable energy, and digital innovation. These areas “promise sustainable growth while aligning with global decarbonisation and technological advancement trends”. A diversified economy would also be “more resilient” to external shocks, providing stable, high-value job opportunities.

In another interview on ONE radio in June, Dr Abela said that the Government will not phase out subsidies on energy and fuel as recommended by the European Commission.

He said that the government will engage with the European Commission to explain the country’s “unique challenges” in the energy sector, and that “there will be no change in policy to incentivise people and businesses [through energy support]… but our plan, agreed with the Commission to reduce the deficit by 0.5 per cent every year is on track.”

Hence, CEOs should be prepared for both regulatory changes and possibly new opportunities tied to sustainability.

For business leaders, the 2025 Budget will likely present a range of challenges and opportunities. From tax relief that could boost consumer spending to changes in labour market policies that may affect recruitment, the government’s proposals will shape the economic landscape. Infrastructure improvements and a renewed focus on sustainability could also have long-term implications for sectors such as construction, energy, and tourism.

Staying informed and adaptable will be key for CEOs as they navigate the budget’s impacts on their operations.