Government tipped on revenue management

Economic and tax experts have urged government to revise the application of some taxes and prioritise existing projects to minimise pressures from “erroneous” projections.

The advice follows a report from the Budget and Finance Committee of Parliament, which questioned some of the projections outlined in the forthcoming fiscal plan.

It also comes amid fears that the assumptions underpinning the 2024/25 National Budget are unrealistic.

In its report presented  in Parliament on Tuesday, the committee’s chairperson Gladys Ganda said they observed that the government’s estimates on pay as you earn (Paye) were higher than the projections they got from the Malawi Revenue Authority (MRA).

She said: “The committee is aware that this may be attributed to pay rises, but it noted that the government, being the largest employer has only allocated K70 billion for new recruitment and salary increments.

“Therefore, even with private sector pay rises, the increase would be hard to justify.”

Ganda further said government has revised downwards its estimates on non-tax revenues from dividends paid by State-Owned Enterprises by 89.45 percent from K141.72 billion in 2023/2024 fiscal year to an estimated K15 billion in 2024/2025 financial year.

Reacting to the developments, tax specialist Emmanuel Kaluluma and economic analyst and researcher Exley Silumbu said in separate interviews that it is a “challenge” to contradict the assumptions made by the government because of the unpredictability of the economy.

Kaluluma, however, said it is “normal” that the government would experience a reduction in Paye revenue following the revision to the zero-rated tax bracket.

He urged the government to change the application of the revised tax structures to mitigate the losses.

Said Kaluluma: “The decision was a smart move to protect the poor.

“But the problem is the way the tax is applied. It does not make sense for people who are earning more than K150 000 to qualify for a tax meant for the poor.”

On his part, Silumbu said if they are wrong, the projections would exert pressure on the government’s budget operation if they are wrong, but stressed that electioneering would exert more pressure on the budget, particularly if the government moves to introduce new projectst.

“In the end, the government will fail to finance all the projects and some will stall,” he said.