Malta's Family Tax Incentive: A Bold Move to Combat Demographic Decline

In a strategic move to tackle its demographic challenges, Malta announced tax reductions for parents with two or more children. The initiative, outlined by Finance Minister Clyde Caruana in the 2026 budget, reflects a response to Malta's notably low fertility rate, which Eurostat data shows is the lowest in the EU.

The fertility issue is considered a significant threat to Malta's future, with spiritual leaders emphasizing the risk of 'ethnic extinction'. The tax cuts are a bid to encourage larger families, aiming to stabilize and potentially increase the national population.

Caruana highlighted economic growth and fiscal stability expectations, projecting GDP growth of 4.1% by 2026 and stable national debt levels. This demographic policy follows a similar approach adopted by Poland, underscoring a broader European trend of incentivizing family expansion through financial incentives.