Pre-budget consultations shouldn’t be road shows

 

It is that time of the year again when officials from the Ministry of Finance, Economic Planning and Development go around the country meeting stakeholders to solicit input for the next budget that rolls out on July 1.

Through the Pre-Budget Consultation Meetings, officials from the ministry, usually led by the Minister of Finance, Economic Planning and Development or the Secretary to the Treasury (ST), outline the budget framework and listen to input from stakeholders comprising, among others, the business community, academia, students, economists and ordinary citizens.

National budgets or the expenditure plan play a critical role in fostering economic prosperity and eradicating or reducing poverty. Through the national budgets, governments implement their development plans.

While it is not practical and possible to take on board every input from the consultation meetings, the Ministry of Finance, Economic Planning and Development would do the stakeholders justice if it is seen to be accommodating some of their suggestions in one way or another.

Taxation is one sticky issue in the budget and the Institute of Chartered Accountants in Malawi (Icam) and its partners prioritise the same year in and year out.

During the first Pre-Budget Consultation Meeting in Blantyre this week, Icam expressed concern that over the past four or so years, Treasury has tended to ignore its input. Not that it should have been incorporated wholesale.

This time around, Icam, among other tax measures, lobbied for the increase in the tax-free income from the present K30 000 to K50 000 although, in its assessment, K100 000 would be ideal given the economic situation.

Given the poor collections by Malawi Revenue Authority (MRA), the main source of domestic revenue and indeed funding to the budget since donors withdrew their 40 percent direct budget support on the recurrent budget, it would be tricky for Minister of Finance, Economic Planning and Development Goodall Gondwe to forego the K70 000s or even K20 000s.

In its input, the Malawi Confederation of Chambers of Commerce and Industry (MCCCI) called for a reduction and rationalisation of taxes to boost the productive capacity of businesses.

MCCCI argued that neighbouring countries are pondering reducing corporate taxes to attract more foreign direct investment (FDI). When working out the tax measures, it is important that Treasury strongly considers the corporate tax rates as well, especially in view of the fact that Malawi is in competition with others for FDI. Malawi is already at a disadvantage due to factors such as unreliable power supply, poor infrastructure and indeed taxes, factors that increase the cost of doing business.

During the Blantyre leg of the consultation series, ST Ben Botolo assured that inputs from the meeting are expected to feed into the 2018/19 national budget formulation process. He was quick, though, to add that “not all suggestions can be accommodated in the 2018/19 budget, but it will remain critical in guiding the Ministry of Finance in the budget process”.

I agree that “not all input can be incorporated”. However, I implore on Treasury to find a way of considering the input albeit not wholesale. For instance, Icam, for all its technical input on taxation, sounded frustrated that for three or four years its input has been ignored. This does not inspire confidence from such stakeholders.

I urge Treasury to desist from turning the Pre-Budget Consultation Meetings into some kind of “road show” or “talking shop” where brilliant ideas are presented, but not implemented. Incorporating stakeholders’ input will enhance ownership of the budget.

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