The Gozo Business Chamber in its reaction to Budget 2027, noted that it contains a number of positive measures which support economic stability, investment and the competitiveness of businesses, while also providing important social support to families.
However, it said that ”at the same time, the Chamber believes that a number of measures announced in the Budget require careful assessment from a Gozitan perspective, particularly those affecting tourism and the labour market.”
The Chamber said that it particularly welcomed the continued protection of households and businesses from increases in international energy and fuel prices. Maintaining stability in these areas provides greater certainty for consumers and businesses alike, while helping to contain inflationary pressures which could otherwise negatively affect consumption, operating costs and competitiveness.
Support for Businesses, Investment and Start-Ups
The Chamber welcomed the new framework through which companies with a turnover not exceeding €1 million may benefit from a corporate tax rate of 25% instead of 35% on profits that are retained or reinvested in the business.
It said that this measure can be particularly relevant to Gozo, where small and micro-enterprises form an important part of the economic base. Encouraging businesses to retain and reinvest profits can support greater productivity, modernisation and further investment.
The Chamber also welcomed the continued emphasis on digitalisation, automation and investment which generates higher added value, together with the continued support being provided to young entrepreneurs through initiatives such as the Youth-Led Start-Up Support Scheme.
”These measures are aligned with the Chamber’s long-standing position that Gozo needs to diversify its economic base and create more opportunities in higher value-added sectors. National incentives for innovation and enterprise should therefore be accompanied by a specific effort to ensure that Gozo is able to participate fully in this economic transition,” it said
Tourism and the Eco-Contribution
The Chamber said that particular attention needs to be given to the increase being proposed in the eco-contribution on tourist accommodation. From January 2027, the contribution will rise to €8 per person per night, up to a maximum of €64, for collective accommodation, while a higher rate of €10 per night, capped at €80, will apply to short-let accommodation.
The Chamber said that while it recognises the principle that tourism should contribute towards the infrastructural and environmental pressures it creates, the scale of the increase requires careful assessment.
”This is particularly relevant to Gozo. Self-catering and other non-collective accommodation constitute a particularly important part of the island’s tourism product,” the Chamber said.
The Chamber said it therefore believes that the rationale for applying a higher rate to short-let accommodation than to collective accommodation should be clearly assessed, particularly in view of the potential impact on the Gozitan tourism sector.
The Chamber also called for clarity on the application of the new rates to domestic tourism. ”The domestic market is of major importance to Gozo, particularly for weekend and short-break tourism. Any significant increase in the cost of accommodation for domestic visitors could therefore have a particular impact on the island.”
The question of infrastructure also needs to be considered in its full context, the Chamber said. ”The impact of tourism on Gozo is not generated solely by visitors who stay overnight. A very significant proportion of visitors to the island are same-day visitors who still make extensive use of Gozo’s roads, public spaces, maritime infrastructure and other services without contributing through the accommodation-based eco-contribution.”
For this reason, the Chamber said that it is important that the eco-contribution generated through tourism activity in Gozo should be directly reinvested in Gozo itself, in the tourism product, public infrastructure, environmental quality and the overall visitor experience.
Gozo Channel Tariffs and the Cumulative Cost of Visiting Gozo
The Chamber said it considers that, after many years during which fares for non-residents remained low, a revision of the Gozo Channel tariffs for non-residents is justified. However, in the case of international tourism, this measure should not be considered in isolation.
”The increase in ferry fares is being introduced at the same time as an increase in the eco-contribution on accommodation. It is therefore important to assess the cumulative impact of these measures on the total cost of a holiday in Gozo, and consequently on the competitiveness of the Gozitan tourism product, the Chamber said.
It stressed that ”this cumulative impact is particularly relevant because Gozo, by virtue of its double insularity, already entails an additional journey and cost for an international visitor when compared with a stay on the main island.”
Labour Market and Work Permit Fees
The Chamber said ir also believes that the impact of the increased fees associated with work permits for third-country nationals needs to be ”closely monitored. The fee for a new application will increase from €600 to €800, while an additional €400 annual infrastructure contribution will apply to both new applications and renewals.”
The Chamber said it recognises the Government’s objective of encouraging a transition towards an economy based increasingly on productivity, technology and higher added value rather than continued labour-intensive growth.
”Nevertheless, the reality of the Gozitan economy must also be considered,” the Chamber said. ”A number of sectors within Gozo’s private economy remain highly dependent on foreign workers, against a background where employers already experience difficulties in recruiting the workers they require.”
The Chamber said it therefore believes that ”the impact of these additional costs on the competitiveness of Gozitan businesses should be monitored carefully, particularly in those sectors where labour shortages are already significant.”
Fair Competition and Tax Compliance
The Chamber positively noted the measures aimed at ensuring greater clarity and fairness in the application of taxation and VAT rules across different sectors.
Measures aimed at addressing VAT abuse in the construction sector, strengthening compliance with fiscal invoicing requirements and ensuring a clearer and more consistent application of VAT rules are important in creating a level playing field, the Gozo Chamber said.
It added that ”businesses which comply fully with their fiscal obligations should not find themselves at a competitive disadvantage when compared with operators that fail to do so.”
Health Services in Gozo
The Chamber welcomed the measures announced in relation to the Gozo General Hospital.
The continuation of the Hospital Masterplan, including nine additional outpatient clinics, represents an important investment in healthcare provision in Gozo, the Chamber said.
The Chamber particularly welcomed the objective of providing more healthcare services directly in Gozo, reducing the need for Gozitan patients and their families to travel to Malta.
However, it stressed that ”these interventions need to continue forming part of a holistic and long-term plan for a new hospital for Gozo, ensuring that the island has the facilities, but also the human resources and specialist services required for the needs of its community and its future development.”
Energy Infrastructure and Resilience
The Chamber also strongly welcomed the investment being undertaken to strengthen electricity connectivity between Malta and Gozo.
The process initiated by Enemalta for two new 33kV submarine cables between the islands is an important investment in the capacity, resilience and security of Gozo’s electricity supply, the Chamber said. Equally important are the technical studies being carried out for a new 132kV connection between Malta and Gozo.
It went on to say that, ”reliable and resilient energy infrastructure is essential not only for households but also for Gozo’s future economic development. If the island is to attract more technology-driven, digital and higher value-added activities, adequate energy capacity and security of supply are fundamental requirements.”
Strategic Infrastructure and Gozo’s Long-Term Development
While welcoming the measures announced in the Budget, the Chamber stressed that Gozo’s economic development ”must continue to be addressed in structural and long-term terms.”
The Chamber therefore reiterated the importance of advancing the major strategic projects required for Gozo’s future development, including:
• the acquisition and introduction of the new vessels for the Gozo Channel fleet;
• the expansion and futureproofing of Mgarr Harbour;
• the implementation of the Gozo Rural Airfield;
• adequate investment and preparation in connection with Victoria 2031 – European Capital of Culture; and
• a much stronger and coordinated effort towards the diversification of the Gozitan economy.
The Chamber insisted that ”these projects should be supported by adequate financing and clear implementation pathways throughout the legislature. Several of them form part of commitments already made for this legislative period and are fundamental to Gozo’s ability to improve its connectivity, strengthen its competitiveness and create new economic opportunities.”
The Chamber said it believes that infrastructure investment ”needs to proceed hand in hand with economic diversification. Gozo requires a stronger presence of high value-added activities which are less dependent on scale, physical resources and continued labour-intensive growth. Budget 2027 therefore contains a number of measures which the Chamber considers positive.”
The Gozo Business Chamber concluded by saying that ”the challenge is to ensure that these measures, together with the major strategic projects required by Gozo, form part of a coherent and adequately financed long-term development framework for the island.”
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