Ernest Mtingwi views on financing Malawi budget 2015/16
Parliament as well as the nation is now considering and digesting the 2015/2016 national budget amounting to K901 billion which was presented to Parliament on Friday 22nd May 2015 by the Minister of Finance Goodall Gondwe.
Already various comments and observations have started pouring in from various stakeholders which will no doubt assist members of parliament when they start debating the budget. I therefore
join the various stakeholders to comment on the budget.
What always catches my attention is the financing of the budget. I always consider the financing of the budget extremely important because spending follows income. Without income there can be no
expenditure. Even saving depends on earning income. This applies both to people and organisations including governments.
In presenting the 2015/2016 budget the Minister of Finance said and I quote: “Tax revenues are projected to rise from K581 billion to K592 in 2015/16.” This is an increase of K11billion. In percentage terms this is an increase of 1.9% . If indeed the tax revenue figures of K581 billion for 2014/2015 and K592billion for 2015/2016 are correct then it means that tax revenues will grow by less than 2% in 2015/2016 fiscal year when the economy is projected to grow by 7%.
If this turns out to be the case then this is likely to be the lowest growth in tax revenue since 1964 when Malawi became an independent nation.
Even in the 1992/1993 fiscal year long before the Malawi Revenue Authority(MRA) was formed tax revenues grew by 13%. This is why I have decided to raise this point because if this turns to be the
case it is imperative that the Minister of Finance explains why he is of the view that tax revenues will grow by less than 2% in 2015/2016 fiscal year.
Since MRA became operational in February 2000 it was only in 2001/2002 fiscal year when tax revenue grew by 3.7% only.
Thereafter tax revenue has been growing at more than 15%. An explanation by the Minister of Finance is important because as the Minister of Finance himself has said the 2015/16 budget will be
financed from domestic revenues of which tax revenues form a large share.
Furthermore I do not think this very low projected tax revenue growth can be justified by the need to be conservative in estimating tax revenue when there is a solid long record of tax revenue
collection.
The formation of the Malawi Revenue Authority(MRA) was one of the reforms government implemented to boost tax revenues. The expectation therefore is that the annual growth of tax revenues in the post MRA era should be more than in the period before MRA.
- Ernest Mtingwi is former director general of MRA