Positive tax variance good indicator—Expert
A tax expert has hailed Malawi Revenue Authority (MRA) for surpassing the June 2016 target by K1.81 billion or three percent, giving hope that the newly introduced tax measures could work going forward.
Tax expert Emanuel Kaluluma in an interview yesterday hailed the tax bull for beating its target at the end of its financial year, a development he said gives positive indications.
He said: “The positive achievement is coming at a time the tax collector is closing its financial year, giving hope for the newly implemented tax regime that perhaps if they apply the strategies they have applied in this last month of the financial year, we would get there.”
However, Kaluluma said good performance in June is not a guarantee that the tax collector will be registering successes in its revenue collections, but a sign that the authority can deliver.
For the first time in more than six months, MRA has beaten its target in all the tax lines except excise and import duties, according to the tax revenue outturn for June 2016.
Excise duties, at K4.88 billion, was 97 percent of the target while import duty registered an 85 percent performance by collecting K5.56 billion in June 2016.
The better-than-expected performance comes amid poor revenue performance of the tax collector in the year despite employing various strategies to widen their tax base.
It also happened within a poor economic environment characterised by high inflation and interest rates, high cost of living which is depressing people’s buying power. MRA missed its target for the 2015/16 fiscal year by K24 billion by collecting K573.4 billion against a projection of K597 billion, which represents 96 percent overall collection.
Minister of Finance, Economic Planning and Development Goodall Gondwe told Parliament when presenting the 2016/17 National Budget that in the absence of predictable budgetary support, tax measures will concentrate on broadening the tax base, improving tax administration, removing economic distortions to spur production and encouraging tax compliance so as to enable government finance 80 percent of its national budget with local resources.
He said compared with the 2015/16 revised budget, tax revenues are projected to increase by 21.8 percent, reflecting the fact that nominal gross domestic product (GDP), which is the base for most of the taxes, will grow by 24 percent to around K4.2 trillion.
The published revenue performance report indicates that income and profits over performed its projection of K25.49 billion by four percent, collecting K26.48 billion on account of strong performance in all taxes under this category except provisional tax and fringe benefit tax (FBT).
Pay as you earn (Paye), collected from employees, recorded an outturn of K14.39 billion, beating the target by seven percent.
“This is due to government honouring all outstanding remuneration as the fiscal year is ending,” reads the report.
Earlier, Economics Association of Malawi (Ecama) executive director Edward Chilima said the MRA’s poor performance could be attributed to the current economic situation because businesses have been left with little or no breathing space; hence, the underperformance.
