Hostile economy affects non-tax revenue—analystsis
Taxation experts say the underperformance in non-tax revenue line during the first half of the Malawi Government fiscal year is a reflection of the country’s volatile economy.
The sentiments follow Treasury figures contained in the 2022/23 Mid-Year Budget Review Statement which show that non-tax revenue underperformed in the first half of this year and is expected to decline further in the second half.
The data shows that non-tax revenues at K39.2 billion during the first six months of this year fell short of the target of K71.1 billion by K31.8 billion on account of non-remittance of parastatal dividends.
The data further shows that parastatals underperformed by K41.2 billion against their target of K50.39 billion, having collected K9.23 billion.
Speaking in an interview on Tuesday, Institute of Chartered Accountants in Malawi acting chief executive officer Charles Chimpeni that beyond the underperformance is the hostile economic challenges, which are affecting business performance.
He called on Treasury to address inefficiencies in government ministries, department and agenciesto boost non-tax revenue.
Said Chimpeni: “What is worrisome is that government may be forced to suspend some development activities due to inadequate financial resources as we have seen in the current budget.
“Budget implementation is achieved through combined financial resources generated through various revenue streams; hence, revenue underperformance is one aspect that would definitely force government to scale down some activities and focus on the essential activities for survival.”
Tax expert Emmanuel Kaluluma said declining non-tax revenue collection confirms that the economic situation is hostile.
“Revenue collection is a yield of activities that businesses do. Looking at the last six months, business activities have slowed due to the difficult economic environment as such the purchasing power has also declined,” he said.
Kaluluma, who is also EK Tax Consultants senior managing partner, observed that insufficient power supply has also affected businesses, adding that the country’s compliance levels are minimal which makes revenue collection a problem.
He said: “Businesses are going long hours without power, as such, there are no revenue generation activities happening.
“Over and above, non-compliance in some government institutions is dealing a heavy blow to revenue collection efforts.”
Minister of Finance and Economic Affairs Sosten Gwengwe said during the 2022/23 Mid-Year Budget Review Statement presented in Parliament on Friday that government plans to enhance monitoring of revenue collected by State-owned Enterprises (SOEs), commercial SOEs through opening holding accounts with the Reserve Bank of Malawi.
Meanwhile, domestic revenue is now projected to go down from K1.63 trillion to K1.62 trillion, representing 0.1 percent reduction.
Of the total domestic revenue, taxes are projected at K1.53 trillion with non-tax revenues at K94.4 billion.
