Malta - Politics, government, and taxation
Malta was a British colony from 1814 until independence in 1964. After independence, the country became a member of the British Commonwealth, with Queen Elizabeth II as the head of state. In 1974 Malta became a fully independent republic and replaced the queen with an elected president.
Malta is now a constitutional democracy, governed by the unicameral (one chamber) House of Representatives, whose 65 members are popularly elected to 5-year terms of office. The chief of state is the president, who also serves a 5-year term but is elected by the House of Representatives. The leader of the majority party in the legislature is appointed prime minister by the president. Because of the small size of the islands, there are no local or regional government bodies, and all police, education, and postal services are administered from the capital city of Valleta. The exception to this is the Isle of Gozo, which has a separate ministry.
Malta has 2 main political parties: the Nationalist Party and the Labor Party. The nation's political loyalty is evenly divided between the two. The Maltese people are passionate about politics and voter turnout for elections often exceeds 96 percent.
The Maltese government is deeply involved in the nation's economy. It accounts for almost half of the nation's GDP and employs 10 percent of the workforce . Because of several major infrastructure projects, the government has been forced to borrow to finance the resulting deficit. In 1999 Malta borrowed US$275 million. Major programs include a fiber optic telecommunications system, a new international airport, and improvements to port facilities. Loans are also used to support unprofitable government-owned businesses such as the Malta Dry-docks, which cost the government US$15 million in 1999 to cover shortfalls.
The government wants to privatize several state-owned enterprises. In 1997 partial privatization of the national telecommunications company, Maltacom, began, and in 1999 the government sold 70 percent of its ownership of the Mid-Med Bank (now known as HSBC Ltd.) to a Hong Kong company for US$200 million. Plans are in place to privatize the international airport, the Public Lotto (Lottery), the Bank of Valletta, and the Malta Freeport Terminal. There are also negotiations with Tunisia over oil exploitation in the Mediterranean Sea between the 2 countries.
The armed forces are small, composed of land troops, an air squadron, and a naval squadron. In 1999 the government spent US$201 million, or 5.5. percent of the nation's GDP, on defense.
Even though Malta is on the path to membership in the EU, there is long debate over the benefits of such a move. The Labor Party froze Malta's membership efforts after taking control of the government in the 1996 elections, but the Nationalist Party restarted the application process after its return to power in 1998.
The government of Malta offers several incentives to stimulate foreign investment. Most attractive among these is a 10-year tax holiday to industries that export over 95 percent of their goods. Income tax cutbacks, duty -free imports of machinery and equipment, plus deduction on training, research, and development entice foreign companies. The government earns its revenue through a variety of taxes. Approximately 23 percent of revenues came from income tax, 25 percent from social security tax , 17 percent from consumption taxes, and the remainder from licenses, taxes, and fines; customs and excise duties; and other forms of revenue collection.