Lipenga hits at budget critics
Minister of Finance Ken Lipenga has hit back at critics of the 2013/14 financial plan who contend that the budget will inflict pain on poor masses in the country.
The minister has also described some criticisms of the budget as ‘contradictory’ noting that other proponents of tax holidays are also calling for an expansion in the K20 000 tax-free band which, he said, is suicidal to the economy, as it might leave government ‘with no revenue at all.’
“Ultimately, what we are hoping will happen with regards to these measures, is that the poor people will also benefit. Unfortunately, people want to fault the budget statement,” the minister said in an interview on Saturday.
He was speaking on the back of condemnation by social and economic commentators who have argued that the personal income tax structure in the budget is not intended to address prevailing income inequalities but to burden the poor.
The Centre for Social Concern (CfSC) last week doubted that the tax proposals as they stand right now in the 2013/14 budget would unlikely achieve redistributive effects.
But, according to Lipenga, the main thrust of the budget is to grow the economy by encouraging development in the private sector.
Particularly, he said the ultimate aim of the fiscal plan is to grow an export-led economy because the ultimate solution in Malawi is to grow the economy.
He said government understands the urgent need for the country to increase its exports to the international market, hence targeting some companies that are involved in value adding and exports in the budget.
The minister said it was amusing to hear some critics arguing that the tax measure on bicycles is only intended to benefit businesses and not ordinary Malawians.
In the 2013/14 budget, government has totally removed import duty on bicycles and in addition, import duty on motorbikes of engine capacity not exceeding 250cc, has been reduced to 15 percent and excise tax on these motorbikes has also been removed considering that such a mode of transport is widely used, especially in the rural market areas.
Added Lipenga: “One of the most amusing things was that the tax measures on bicycles will only benefit the companies, the only way an importer of bicycles can benefit is to have more people buying the bicycles, as a result of bicycles becoming cheaper. And we expect that should happen because we have removed taxes. It will be very mean for those companies to charge the same prices.
“And a result of bicycles becoming cheaper, the importer imports more of these bicycles and so more Malawians can afford them. Therefore, the consumer will benefit and the person who sells will also benefit and we will end up in a win-win situation.”
On tax holidays, there are many schools of thoughts on the concept and he repeated that the Malawi Government is offering tax holidays reluctantly since government is foregoing revenue as a result of such holidays.
He, however, warned that government will be strictly watching the tax holiday provisions in the budget to see whether companies are making good use of the provisions.
“The whole idea of giving tax incentives to a particular sector is to make sure that that sector can export more and if that sector exports more, then things will do well, and if they do more, they will expand and offer employment to our people also if they will export more they will bring more foreign exchange and ultimately the target of the measures is the poor ordinary Malawian,” he said.
The minister also expressed hope that it is possible for Malawi to address her balance of payments challenges but said that could only happen if Malawians work hard to produce more. He also encouraged the private sector to expand and create jobs for more people.
