credits are provided to firms investing in ICT, research and development, back office service work and e-
business services.
In tandem with these measures, effort is directed towards increasing labour market participation,
especially the participation rate of females and older workers, and to increase the productivity of
employees. Regarding the latter, it is pertinent to note the abolishment of compensation by additional
days of vacation leave for public holidays that fall on weekends. Furthermore, in the 2007 and 2008
Budgets, the income tax bands were revised such that the income tax paid by employees is reduced by
extending the tax-free range of household income and by broadening the income tax brackets.
Furthermore, regulations stipulating a lump sum minimum National Insurance (NI) contribution, which
was perceived to constitute a disincentive to work especially at low levels of income, were replaced with
a proportional 10 per cent of gross income. In a bid to raise female participation in the labour market and
increase the incentive to work, the Budget for 2007 announced measures aimed to alleviate the costs of
childcare services both to employees as well as employers. In order to further promote employment
amongst disadvantaged groups, the Budget for 2008 announced a measure to exempt long-term
unemployed aged over forty-five years who start-up their own business from national insurance
contribution during their first year of operation. In addition, a measure was introduced whereby persons
who reach pension age but decide to continue working will receive a pension irrespective of the income
earned. Previously, such persons, if under 65 years of age, were disqualified from receiving a pension if
they earned a weekly income which exceeded the National Minimum Wage. In order to encourage
entrepreneurship further, persons working in a family business can register as employees for fiscal
purposes, thus having the opportunity to enjoy all social benefits.
In an effort to further sustain the tourism sector, which is a main contributor towards GDP, various
measures have been put in place to increase Malta’s attractiveness as a tourist location. In particular,
funds were allocated to carry out a comprehensive branding exercise of Malta and for the management of
tourist zones. Plans for the future of tourism are encompassed in two main policy documents, finalised in
the beginning of 2007 and outline the direction and thrusts to be pursued to augment the tourism sector in
Malta in a sustainable manner.
2.2. Education
The level and standard of education have an important impact on economic activity, particularly when
considering the requirements of certain high value added sectors that are key for Malta’s economy and
which require a highly skilled and adaptable workforce. Over the past decade, the education sector has
experienced various reform measures that intended to develop the country’s human resources. These
measures included, amongst others, the creation of the Malta College for Arts, Science and Technology
(MCAST) in order to provide post-secondary vocational education, the development of a local
examination system (MATSEC), the use of ICT in education, and the introduction of a new National
Minimum Curriculum for primary and secondary education.
A reform of the Students’ Maintenance Grants system was announced during the third quarter of 2005.
The changes were twofold: a reform of the normal grant to students attending full-time courses at the
University of Malta whilst strengthening the social element through the introduction and extension of
means-tested supplementary grants and other special grants. The reform of the system of normal grants
was aimed at extending the incentives to students attending courses considered important in the context
of the socio-economic development of Malta. These courses are mainly science-oriented and include
information technology and engineering. At the same time the grant received by students attending other
courses was reduced. This reform applies for students attending the first year of an undergraduate course
at the University of Malta from October 2005.
Government has embarked on an educational reform with the aim of further improving the educational
sector. In 2006, Government amended the Education Act (Cap. 327) with a view to strengthen and
improve the quality of the educational system and deter early school leavers. At the moment a pilot