1.2 Net Expenditure
Social protection covers all measures from public or private entities to support households or individuals from a defined set of risks or needs, aiming to reduce poverty and vulnerability within societies. Throughout this domain, users will be presented the principal attributes of Malta’s social protection system, classifying data by ESSPROS function and social protection scheme. In Section 1.1, a review of the gross social outlay along the five-year period between 2020 and 2024 will be conducted. The remaining sections will then shift focus towards the ESSPROS modules; (1) Net ESSPROS (1.2), (2) Pension Beneficiaries (1.3) and (3) Unemployment Benefits Recipients (1.4).
Salient Points
Net outlay rose by €124.0 million from €2,596.4 million in 2022 to €2,720.3 million by the end of 2023.
Following the discontinuation of the COVID-19 Support Measures in 2022, social outlay recouped in taxation fell by €12.5 million to €20.0 million in 2023.
The highest share of social taxes was obtained from the Sickness Days – Employers’ Expenditure (55.4 per cent). Remaining taxation was collected from the Social Security Contributory Benefits (25.5 per cent) and Service Pensions (19.1 per cent) schemes.
Charts
1.2.1 Net expenditure by ESSPROS function
Reference years: 2014-2023
Tables
Methodological Notes
1. The scope of the Net module is to eliminate any taxes and/or social contributions applicable on cash social benefits, hence providing a more accurate geographical comparison between MSs’ data. In cases when actual data on the amount of taxes and social contributions paid by recipients is unavailable, estimates are compiled using averaged itemised tax and social contribution rates (AITR and AISCR, respectively). These rates reflect the “sum of taxes/social contributions paid on that benefit by recipients divided by the total income from that benefit” (ESSPROS Manual, Appendix IV, Articles 39 and 40):
AITRi
=
∑
tu = 1, n TIi,tu Ii,tu
tu = 1, n TIi,tu Ii,tu
AISCRi
=
∑
tu = 1, n SCi,tu Ii,tu
tu = 1, n SCi,tu Ii,tu
, where:
• I = amount of income of benefit type i,
• TI (SC) = amount of tax (social contribution) paid on benefit income,
• tu = the fiscal unit (recipient) obtaining the benefit income, and
• n = total number of benefit recipients.
2. Following from 1, the resulting rates are then applied to the corresponding gross spending to obtain an estimate of the net social benefits as follows:
Net social benefits = Gross social benefits X (1 – AITR – AISCR)
3. In Malta’s case, taxable data on the relative social benefits recipients is collected from the Commissioner for Revenue (CfR). Personal identity card numbers are extracted from the SABS database, as provided by the DSS, and sent to the CfR to match these unique numbers with those found in their own micro database to obtain the corresponding tax data.
4. Similarly, tax data on Wage Supplement recipients were collected by comparing personal identity card numbers extracted from micro data provided by Malta Enterprise with the CfR’s tax database.
5. For each beneficiary i, their corresponding tax rate is calculated by dividing their gross tax paid during the reference year with the person’s income subject to taxation:
Tax Ratei
=
Gross Taxi
Chargeable Incomei
× 100
6. To estimate the amount of tax specifically payable on the benefit in question, the rate in point 5 is weighted by the proportion of the total benefit outlay paid to the individual:
Weighti
=
Benefiti
∑i=1n Benefiti
AITRi =
Tax Ratei ×
Weighti
, where n is the total number of benefit recipients.
7. The total itemised tax rate between recipients is then compiled by aggregating the rates in point 6:
8. The calculation of AISCRs, in Malta’s case only applicable to the Wage Supplement, follows along the same lines as that listed in points 5 to 7.
