Government intends to shift from reliance on revenue from taxation of labour and investment (factors of production) to consumption in the medium-term, as it continues to embark on expanding the tax base.
In a published 2018 Economic and Fiscal Policy Statement issued by the Ministry of Finance, Economic Planning and Development, fiscal authorities said over the medium-term, government will be committed to implementing broad-based tax reforms to foster a simple, efficient, transparent and fair tax system.
Among other things, government intends to leverage the usage of information communication technologies (ITC) in tax administration and review some user fees and charges while improving efficiency.
“Over the medium-term, government will be committed to implementing broad-based tax reforms to foster a simple, efficient, transparent, and fair tax system. Tax policy initiatives will be guided by a shift in reliance on revenue from taxation of labour and investment [factors of production] to consumption. Furthermore, certain measures that have resulted in significant revenue loss shall be reverted.
“In terms of the non-tax revenue, government will review some user fees and charges, improve efficiency in collection and accountability of non-tax revenues. Further, government is committed to improving transparency in revenue collection and management by adhering to principles and objectives of the Extractive Industries Transparency Initiative [EITI] which the government signed up to,” reads the policy statement in part.
The development comes in the wake of continued poor revenue collection by public tax collector Malawi Revenue Authority (MRA), which has also affected the 2017/18 budget implementation.
Government had projected a K980 billion domestic revenue collection by June 30 2018 but MRA has not performed as expected due to challenges facing the economy, chief among them power outages. From a half-year target of K490 billion, MRA under-collected by K46 billion.
The International Monetary Fund (IMF) last week advised fiscal and monetary authorities to work on containing budget deficits and inflation and safeguarding and building on gains in public finance management reforms, which it says if left unchecked, could result in loss of confidence from the donors and the private sector. This followed the approval of a three-year $112 million Extended Credit Facility (ECF) for the country.
But in an interview on Thursday, however, tax consultant Emmanuel Kaluluma said while government is faced with recurring deficits mostly due to poor revenue collection, widening the tax base would be difficult considering the state of the economy.
Speaking during the start of the 2018/19 pre-budget consultation meetings in Blantyre in March, Malawi Confederation of Chambers of Commerce and Industry (MCCCI) private-public partnership manager Hope Chavula asked Treasury to consider reducing and rationing taxes to boost business’ productive capacity. n