OVERVIEW OF FISCAL DECENTRALISATION

Sub-national government in Malta is based on a three-tier structure: six regional committees, 68 local councils and 16 administrative committees. 

Legal acts governing fiscal decentralisation

The system of local government (local councils) was established in 1993 through the Local Councils Act and was subsequently also recognised in the National Constitution by an amendment in 2001. 

Qualifying fiscal decentralisation

Malta is one of the most centralised EU Member States: in 2018, sub-national government expenditures in Malta accounted for just 1% of total government expenditures.

Local councils' revenues are almost entirely dependent on transfers from the central government. Transfers are determined every year according to a formula (revised several times in 1999 and 2009) based on councils' specific features and on estimations of the cost of service provision. Local councils are allowed to increase own revenues by charging fees for the services they provide and from specific municipal activities. 

Source: authors’ elaboration on EUROSTAT data. For further details, see methodology. 

LEVEL OF FISCAL DECENTRALISATION

Revenue autonomy (own revenues relative to total resources available) at the local level is the lowest in the EU (8% versus an EU average of 53% in 2018), which entails a dependency on central government transfers that is much higher than the EU average (111% versus 48% in 2018). In 2018, grants from the central government in fact exceeded local expenditure. The high fiscal centralisation is also confirmed by the fact that local own revenues represent a negligible share of total government revenues (close to 0% in 2018). 

Source: authors’ elaboration on EUROSTAT data. For further details, see methodology.

The composite ratio, which captures aspects of fiscal decentralisation of both revenue and expenditure, suggests that the governmental structure in Malta has a degree of fiscal decentralisation (close to 0% in 2018) that is much lower than the EU average (16% in 2018).  

Fiscal rules and borrowing capacity

Local councils have an extremely low borrowing capacity that needs to be authorised by the minister responsible for local governments while the Minister of Finance has  to sign any loan contract.   

Deficit and debt at sub-national levels

In 2018, the consolidated gross debt of the Maltese local government sector amounted to 0% of GDP, a value that has remained constant over the last four years.

Source: authors’ elaboration on EUROSTAT data. For further details, see methodology. 

EXPENDITURE BY GOVERNMENT LEVEL AND BY POLICY AREA

Local government expenditures represent a negligible share of general government expenditures in all the areas of spending, with the exception of environmental protection (10% of total general government expenditures in 2017). 

Source: authors’ elaboration on EUROSTAT data. For further details, see methodology.

Local councils' expenditures in 2017 were concentrated in the areas of general public services (54% of the total), environmental protection (28%), economic affairs (9%), recreation, culture and religion (5%) and public order and safety (4%).

Source: authors’ elaboration on EUROSTAT data. For further details, see methodology.