COLA projected to be around €6, says MEA

The Cost of Living Adjustment (COLA) is expected to be around €6, Malta Employers’ Association Director General said in a press conference, as reported on local media – a far cry from the record €12.81 of last year.

The COLA is meant to increase wages by an amount corresponding to cost of living increases, as calculated by the Retail Price Index measure of inflation.

The news emerged from a meeting presenting the Malta Employers’ Association’s (MEA) pre-Budget proposals.

In its 10-point list of recommendations, the MEA touched on “the biggest tax cuts in history” promised by Prime Minister Robert Abela.

While acknowledging “the benefits of reducing tax burdens on middle income workers,” it also highlighted potential risks.

“Higher disposable incomes may fuel further consumer spending in an already overheated economy, leading to a short-lived fiscal measure through inflation. Moreover, reduced tax revenues could force the government to curtail future expenditure, aggravating Malta’s excessive deficit procedure with the European Commission.”

The MEA instead recommended conducting a scenario-based study of projected tax revenues from adjusted tax bands and publishing the reasoning and objectives behind these tax revisions.

The MEA also called for a shift in the economic and social model, arguing that Malta’s current trajectory of maximising numbers, coupled with inadequate planning, “has led to a deterioration in the quality of life on citizens in general, a dampening of workers’ motivation, and exacerbated talent shortages as people resorted to leave the country.”

It pulled no punches in its warning that “the economy is at risk of collapsing under the weight of this unsustainable approach.”

The forthcoming Budget, it said, “must provide direction towards a reconfiguration of priorities, focusing on quality and innovation rather than sheer quantity.”

In line with the above, the MEA emphasised the need for an economic transformation to climb up the value chain while considering Malta’s carrying capacity.

“Malta’s future economic prosperity must align with its physical and demographic characteristics to safeguard the well-being of its people.”

To that end, the lobby said the country must prioritise export-led growth that is sustainable both economically and environmentally, with incentives directed towards sectors that contribute to this goal, encouraging businesses to innovate and create high-value products and services.

Other proposals put forward by the Malta Employers’ Association

Rationalising the Labour Force: Malta needs a comprehensive plan to maximize the value of its human resources. This can be achieved through the adoption of new technologies, such as AI and automation in new and traditional sectors, as well as by strengthening career guidance structures and adapting to an aging workforce. In terms of the latter, measures should include removing fiscal anomalies, providing incentives to adapt work environments, and enhancing education and training opportunities.

Strategic Focus on Capital Expenditure: Long-term capital expenditure should be focused on essential infrastructure, including energy supply and distribution, water resource management, intelligent traffic-management systems, and upgrading drainage systems. Construction activities should be redirected towards strengthening Malta’s infrastructure rather than building for speculation purposes.

Tourism and Catering Industry: Malta’s tourism industry is in dire need of strategic direction. Inadequate long-term planning has led to a general deterioration of Malta’s attractiveness as a tourist destination. The MEA proposes considering a lower VAT rate on catering services to improve competitiveness and compliance.

Maritime and Agricultural Sectors: The MEA calls for a National Maritime Transport Strategy to give the country the direction and tools it requires to harness the full potential of the blue economy. An integral part of this strategy should be the re-establishment of a national authority solely responsible for maritime affairs. Further expansion of the Maltese maritime industry is dependent on the support of a focused and dedicated entity with more efficient internal structures and motivated workforce which is adequately paid and trained to take timely decisions within a complex environment. Additionally, increased resources should be allocated to boost agricultural output and improve Malta’s food security, addressing the shrinkage of agricultural land due to overdevelopment.

Enhancing Governance and Transparency: To restore public trust, the MEA advocates for better governance and full disclosure of government contracts. This includes publishing a list of all individuals holding positions of trust and their remuneration packages. The financing of political parties also needs urgent reform to mitigate risk of corruption.

Capacity Building for Social Partners: The role of social dialogue and the engagement of social partners in national and international forums require government support. Investing in capacity building will enable these organizations to achieve their objectives more effectively and contribute to Malta’s socio-economic development.

Assistance to Private Schools: The collective agreement for state-school teachers will significantly raise operating costs for private schools, which constitute a critical part of Malta’s national education infrastructure. The MEA proposes increasing assistance to families who send their children to private schools, helping them afford the consequent increase in fees.