Research note : the distribution implications of selected policy measures of the 2018 budget for Malta

Abstract

This note provides an assessment of the redistributive impact of some of the main measures announced in the 2018 Budget for Malta. The four main policy measures included in this study are increase in pension rates, introduction of a tax rebate on all persons in employment, tax credit for elderly persons and extension of in-work benefit scheme. Through the utilisation of EUROMOD, a tax-benefit micro-simulation model, we analyse the impact of these policy measures on income distribution and their respective source of income. The overall results indicate that the implementation of these measures contributes to a redistribution of income from higher to lower and middle-income groups whilst lowering the at-risk-of-poverty rate. Increase in pension rates positively affects, and mostly, the bottom three decile groups while the income tax reform leads to an increase in disposable income for the fourth, fifth and sixth decile groups.