The effect of fiscal drag on the Maltese economy : analysing the Maltese tax burden through tax wedge indicators

Abstract

This exercise computed tax wedge indicators for the Maltese tax system on employed labour, using the methodology as developed by the OECD. Between 2000 and 2009 the average tax burden for most households declined, as a result of reforms undertaken to the income tax and family benefits systems throughout this period. The largest declines were experienced by family types with earnings around the average wage value or higher. Taxpayers with lower income levels benefited less from the reduction in the tax burden on employed labour due to the presence of strong nominal and real fiscal drag effects.