The Nationalist Party has accused Robert Abela of misleading pensioners about the taxation of additional income, after a government statement clarified that earnings apart from pensions will continue to be taxed at normal rates beyond a tax-free threshold.
In a statement issued on Tuesday, the PN said Abela had claimed that pensioners would not pay “a single cent” in tax on income earned besides their pension, including income from rents, investments, interest or work carried out after retirement.
However, the Opposition said a subsequent clarification by the government contradicts that interpretation.
Quoting the government statement, the PN said it makes clear that “other income” earned by pensioners will continue to be taxed at the normal rates, arguing that this shows the prime minister’s remarks were misleading.
The party said Abela had now been contradicted both by the legal notice implementing the measure and by the government’s own clarification, calling on him to apologise to pensioners.
Government explains reform
In its statement, the government said the tax changes form part of a reform process launched in 2022 aimed at reducing the tax burden on pensioners.
It said that in the past, pension income and other earnings were combined for tax purposes, pushing many pensioners into higher tax bands of up to 25%.
Over the past five years, the government said it gradually introduced a mechanism that increasingly disregarded portions of pension income and other earnings when calculating tax. This process has now been completed, effectively making pension income tax-exempt up to twice the maximum social security pension.
Under the revised system, other income earned by pensioners is no longer added to pension income for tax purposes but is taxed separately.
The government said pensioners taxed under the single computation will have the first €12,000 of additional income exempt from tax, while those taxed under the married computation will have the first €15,000 tax-free. Any income beyond those thresholds will be taxed at normal rates.
The government said the reform is expected to leave around €25 million annually in pensioners’ pockets and could save some working pensioners up to €3,000 a year in tax.
It added that a recent legal notice also exempts pension income up to double the maximum pension, a measure expected to benefit around 16,000 elderly people.
The government said more than 100,000 pensioners are already benefiting from pension increases introduced in recent years and pledged to continue supporting retirees despite international economic challenges.