Why Minister of Finance needs to explain low projected growth of tax revenue in 2015/2016

In my recent article published by Nyasa Times I pointed out that according to the Minister of Finance tax revenues will grow by mere 2% in 2015/2016 from K581billion in 2014/2015 to K592billion in 2015/2016. This is likely to be the lowest growth of tax revenue since 1964 when Malawi became an independent nation.

Finance Minister Gondwe

Finance Minister Gondwe

In view of the foregoing let me highlight some of the reasons why I feel that this sharp drop in tax revenue growth calls for a rational explanation by the Minister of Finance:

1. Even a conservative tax revenue growth of 10%  based on  the 2014/15 tax revenue figure of  K581billion would bring in an additional revenue of K50billion. This would go a long way towards paying for essential services such as increasing the number of trainee health personnel such nurses, clinical officers etc.  It may even make it possible for Government to start considering  whether to reduce or eliminate fees for health personnel trainees in order to dramatically increase the supply of health personnel to ease the shortage of health personnel in the country.

2. A declining percentage of tax revenue growth automatically means that the cost of collecting each Kwacha of tax revenue in 2015/2016 fiscal year will increase. It is widely accepted that the rising cost of collecting each Kwacha of tax revenue has the effect of shrinking the tax base. Indeed one of the proposals I  would like to put forward is that the Minister of Finance should be informing Parliament the cost of collecting each Kwacha of tax revenue.

3, At a time when it is becoming imperative for Malawi to finance its recurrent budget from domestic revenues it sends a bad signal  for tax revenue growth to be declining as it will happen in 2015/2016 financial year unless there is a credible explanation for such a decline.

4,A declining tax revenue growth may also be indicative of the problem of revenue leakage. If that is the case then there is need for measures to be taken to tackle the problem.

As I stated in the previous article in the post MRA era the nation expects a better tax revenue performance than in the era before MRA  and a reducing tax burden. Indeed these are some of the objectives that the formation of the Malawi Revenue Authority is intended to fulfill.

  • Ernest Mtingwi is former director general of MRA
Follow and Subscribe Nyasa TV :

Please share this Article if you like Email This Post Email This Post

More From the World

Sort by:   newest | oldest | most voted
Jelbin mk
Guest

Angel of doom and mr charonbanthu I think pamenepa chakuvutani ndi chingekezi the former commissioner has suspected that there might be a financial LEAKAGE meaning cash gate ikuchitika Ku tax collecting body not broadening the tax base as you think the government has already increased areas of tax collection including tax on internet but the question the former commissioner is not getting to terms with is how does an increased tax base bring a decreased result???? Hence the suspicion of foul play in the organisation.

nYAU SITHOBWA
Guest

A KEN LIPENGA ALIPO?

Charombanthu
Guest

Mr Mtingwi, whilst your concerns might be genuine, your article falls short of suggesting specific areas where the tax collecting body can focus on to widen the collection efforts. Having been in the system yourself, which areas do you think the minister should have placed more weight on to increase the collections without hurting the already over-burdened taxpayer? Otherwise, I see this as an empty article.

Angel of Doom
Guest
And this is the man who was at the head of MRA? Mtingwi, goes not say which areas he thinks should show growth in revenue and which he thinks should not. Tax is not collected from a single source, and as such the” forecast” growth is a net effect. For the life of me I do not understand what Mtingwi is trying to say or achieve by his middle of the road writings. An estimate is exactly what it says, and it is based on circumstances prevailing at the time. A national budget is discussed in parliament, and if parliament… Read more »
Castro
Guest

Very true former Commissioner. It doesn’t make sense for the tax revenues to be declining when MRA is investing so much in broadening the tax base and closing loopholes. Something is amiss here and am tempted to believe that the current Commissioner General is way out of his depth. It is unfortunate that such a critical government institution could be headed by a political appointee and not someone hired on merit based of capability.

Alex Likoswe
Guest

Mr Mtingwi, please know that there is collection fatigue, the cow had been over squeezed and there is no meaningful economic activity to generate revenue. Basi tu.

sikusinja
Guest

I agree with you Mr Mtingwi. Because in the same budget civil service payroll will increase by K30billion. That in itself if we just considered that lowest paid wud be K50000 wud bring in an extra K5billion in PAYE. So how can all the other taxes bring in just an additional K6billion. Are we planning to cook books again.

chipwete chalunda
Guest

A mtingwi tamangodyani ka pension kanuko musatibowe apa

wpDiscuz

More From Nyasatimes