Reuters Highlights Malta’s New Tax Cuts For Parents To Tackle Low Birth Rate

Malta has drawn international attention after Reuters reported on the government’s sweeping new tax cuts for parents — part of a bold bid to address the country’s record-low birth rate.

Finance Minister Clyde Caruana announced during Monday’s Budget 2026 speech that parents of two or more children will stop paying tax on the first €30,000 they earn by 2028. The measure, he said, directly targets Malta’s demographic crisis, describing the rock-bottom fertility rate as “the biggest challenge facing the country.”

The reform — which will cost the government around €160 million a year and affect roughly 68,000 families — is one of the largest family-focused tax changes ever introduced in Malta.

Starting next year, parents of two or more children will each be exempt from tax on the first €18,500 they earn, rising to €24,000 in 2027 and €30,000 by 2028. Parents of one child will also benefit, with their tax-free income increasing from €14,500 to €18,000 over the same period.

Families filing jointly under the married computation will see similar increases, while parents will continue to benefit until their children turn 18, or 23 if still in education.

Prime Minister Robert Abela hailed the policy as a milestone, saying it marks the first time in Malta’s history that many middle-class families will pay no income tax at all. “The government is there when people start a family, when they have children, when they grow old,” he said, describing strong families as “the foundation of a strong economy.”

Caruana said the measure would give families more time and flexibility. “We’re giving families more time for themselves. Because the tax cut will mean they can work less if they choose to,” he said.

According to Reuters, Malta’s move mirrors a broader European trend, with several countries adopting policies to counter declining fertility rates. Poland recently exempted parents of two or more children from paying income tax, while France and Hungary continue to incentivise larger families through allowances and benefits. Japan and South Korea have gone further, funding dating initiatives and fertility programmes to combat population decline.

Eurostat data shows that Malta currently has the lowest fertility rate in the EU, at just 1.06 births per woman — far below the 2.1 rate needed for population replacement. Despite this, the island’s overall population continues to grow due to foreign workers and their families, who now make up nearly a third of all residents.