BUDGET | Tuesday, 16 October 2007

Generosity marks Gonzi’s last budget before election

Tax band revisions, more children allowances, advantages for working retirees and a bonanza of tax breaks mark Lawrence Gonzi’s last budget before the next general election

It was a tax-free budget that brought about a sensation of Yuletide. A sense that all the wishes of the last twenty years were finally addressed in one evening. With an ambitious predicted deficit of 1.2per cent for next year Gonzi had good reason to be upbeat. In his budget Prime Minister Gonzi was clearly reacting to the concerns of disgruntled voters and conscious that this will be his last budget before a national election. From an economic point of view, Dr Gonzi who also serves as finance minister announced that he was aiming for a budget surplus in two years.
Nonetheless the Prime Minister yesterday presented a budget that reached out specifically to key voters.
The Prime Minister will be accused by the Labour opposition of presenting a pre-election budget and the opposition will have an uphill battle rendering the budget a useless budgetary exercise.
Nevertheless the measures will be welcomed by a wide audience.
Budget 2008 was definitely directed at the family with rather limited visible targeting of business concerns apart from a measure to encourage those who register as self-employed over the age of 45.
The most welcome move will be the revision in the tax bands and the most advantaged in this segment are those who have been paying 35% tax. The measure will leave direct benefits in purchasing power, which is bound to uplift the economy.
Those who paid 35% tax on reaching Lm6,751 for separate or Lm10,000 for joint computation will now have a new rate applied of Lm8,157 and Lm12,021 for separate and joint computation.
The budget will not benefit lower income earners will not benefit as much. There is a special focus on the family with revisions in tax bands and increments in children allowance that will leave a family of two on a salary of Lm6,000 each with separate computation and one child with an added income of Lm23 a month.
Pensioners who keep on working upon retirement age will receive their pension in full regardless of their income. Pensioners in private residences will have up to Eur 2000 exempt from income tax. And most importantly the demand for a revision of the 2/3 cost of living increase to pensioners met by a bonus to make up for the missing 1/3 increase.
Significant tax breaks are listed for parents who send their children to kindergartens or to sport nurseries.
And for companies who wish to offer scholarships to artists, there is possibility of deducting up to Lm8,000 €18,600 from their taxable income.
Other niche groups, which have been targeted include animal rights groups. The budget allocates 150K €349 to NGO’s working in this field.
And what is seemingly a reaction to the Labour party proposal for first time buyers, the budget proposal aims to subsidise loans with a maximum of 1% for first time buyers if the base rate is higher than 3.75% - for the first ten years and for a property valued at 50K.
The minimum rate of 3.5% stamp duty is going to be extended to first 50,000 in the case of first time buyers.
Maternity leave will also be paid until the 14 week.
And families sending their children abroad to follow a degree will also receive their stipend.
The budget is an encompassing budget which will make the task of any opposition leader difficult and the budget as presented will certainly serve to pump more vigour in Gonzi’s drive to modernise the economy. More importantly for him it may serve to guarantee him a victory in the next election.